Hanwha Systems said in a filing on the 27th that, on a consolidation basis, operating profit for the first quarter this year was 34.284 billion won, up 1.94% from a year earlier, and revenue was 807.1 billion won, up 16.95% from the same period a year earlier, according to a preliminary tally.
In the defense industry, exports to the Middle East and deliveries to domestic mass-production programs drove the improvement. Revenue in the institutional sector of defense was 471.2 billion won, up 10% on-year, and operating profit rose 37% to 69 billion won. This reflected revenue from Cheongung-II multifunction radar (MFR) exported to the United Arab Emirates (UAE) and Saudi Arabia, as well as domestic projects such as AESA radar and avionics for the KF-21.
The ICT institutional sector also continued its growth, centered on affiliate businesses. Revenue was 172.3 billion won, up 22% on-year, and operating profit rose 24% to 13.4 billion won. Hanwha Systems said expansion of projects within the group, including Hanwha Aerospace and Hanwha Philly Shipyard Inc., had an impact.
However, Hanwha Systems recorded a net loss of 95.752 billion won in the first quarter this year. The increase in operating loss at Hanwha Philly Shipyard Inc. was reflected. A Hanwha Systems official said, "The Philly shipyard faced added burdens due to the heavy snow that hit the U.S. Northeast in January and February," and added, "Once the previously contracted vessels are delivered, the deficit will be sharply reduced from a year earlier."
The other businesses institutional sector saw revenue of 163.6 billion won, up 38% from a year earlier, but recorded an operating loss of 48.1 billion won. Of this, the Philly shipyard posted revenue of 162.2 billion won and an operating loss of 46.6 billion won. Hanwha Systems said the operating loss reflected downtime due to the Northeast snowstorm and amortization under purchase price allocation (PPA) stemming from the shipyard merger.
PPA refers to the portion paid as a premium—the difference between the acquisition price at the time of an acquisition and the fair value of the net worth of the target—following a corporations merger and acquisition (M&A). A corporations undertaking M&A must amortize the premium portion over a certain period.
On a conference call the same day, Hanwha Systems projected that revenue in the defense institutional sector will increase more than 20% this year from last year, while operating profit will be similar to the prior year as in-house investment rises. In the ICT institutional sector, results are expected to improve on expanded affiliate revenue, and for the Philly shipyard, deliveries are scheduled in the second and third quarters, which will narrow losses, Hanwha Systems said.
As of the first quarter this year, Hanwha Systems' order backlog was 12.1963 trillion won. The defense institutional sector accounted for 9.2457 trillion won, the ICT institutional sector 417.1 billion won, and the Philly shipyard 2.5335 trillion won.