The combined operating margin of Korea's Big Three shipbuilders (HD Hyundai Heavy Industries, Hanwha Ocean, Samsung Heavy Industries) for the second quarter this year is expected to approach a record-high 15%. As low-price orders have decreased and the share of high-value work—such as LNG (liquefied natural gas) carriers, very large gas carriers, and FLNG (floating liquefied natural gas) facilities—secured after ship prices rose has increased, profit growth is far outpacing revenue growth.
◇ All three companies expected to post double-digit margins
According to FnGuide on the 23rd, as of the 21st, the combined second-quarter revenue consensus for the three major Korean shipbuilders stood at 13.0424 trillion won, up 28.8% from a year earlier. Combined operating profit is projected at 1.8925 trillion won, an 80.6% increase. With the operating profit growth rate reaching 2.8 times the revenue growth rate, the combined operating margin of the three companies is forecast to rise 4.1 percentage points, from 10.4% in the second quarter of last year to 14.5% in the second quarter this year.
HD Hyundai Heavy Industries is expected to post the highest margin among the three. The second-quarter revenue consensus is 6.3193 trillion won and operating profit is 992 billion won, implying an operating margin of 15.7%. Profitability is seen improving as LNG carriers and container ships ordered at higher prices two to three years ago are reflected in results, combined with the benefit of a stronger won-dollar exchange rate and production efficiency gains.
Hanwha Ocean's second-quarter operating margin is projected at 14.3%. Revenue and operating profit consensus are 3.4794 trillion won and 497.1 billion won, respectively, which, if realized, would mark the highest quarterly margin since the first quarter of 2020 during the Daewoo Shipbuilding & Marine Engineering era. The merchant ship segment is driving profitability. Hyundai Motor Securities projected an 18.6% operating margin for Hanwha Ocean's merchant ship segment in the second quarter. The explanation is that the sales share of high-margin ships ordered in 2024–2025 has increased and profitability for very large crude carriers (VLCCs), Hanwha Ocean's main ship type, has risen into double digits, allowing the merchant ship segment to maintain high margins.
Samsung Heavy Industries is also expected to maintain a double-digit margin in the second quarter. The projected operating margin is 12.4%, the highest since 2013. Revenue is estimated at 3.2437 trillion won and operating profit at 403.4 billion won. As LNG carriers ordered at high prices are sequentially reflected in revenue, project progress revenue from FLNG projects—such as Malaysia's Z-FLNG, Canada's Cedar, and Mozambique's Coral Norte—is also being added. iM Securities said Samsung Heavy Industries has established a profitability base by holding the world's largest single-yard LNG carrier order backlog of 63 vessels.
◇ Order backlogs grow, growth pillars diversify
With orders for LNG carriers and FLNG continuing, Samsung Heavy Industries has a strong chance of meeting its annual order target for the first time in four years. So far this year, it has won orders for 28 merchant ships and two FLNG units, securing a total of $9.6 billion and filling 69% of its annual target of $13.9 billion. By segment, it secured 28 merchant ships, including 14 LNG carriers, worth $5.2 billion, achieving 91% of the target. In offshore, it secured two units—Coral Norte FLNG and the first Delfin FLNG—worth $4.4 billion, filling 54% of the target. Over the past three years, it fell short of annual targets as offshore plant contracts did not materialize as expected, but this year, a series of large contracts has put the goal within reach.
HD Hyundai Heavy Industries and Hanwha Ocean are also pursuing order strategies focused on profitability, supported by ample workloads. As of the end of May, HD Hyundai Heavy Industries' order backlog stood at $37.005 billion, more than double this year's order target of $17.745 billion. It was the first among Korean shipbuilders to fill 2028 delivery slots and has begun taking 2029 volumes. Hanwha Ocean has not disclosed its annual order target, but so far this year it has won orders for a total of 25 vessels—24 merchant ships, including 15 VLCCs and 6 LNG carriers, and one wind turbine installation vessel (WTIV)—worth $4.35 billion.
The three shipbuilders are also expanding their scopes of work beyond merchant ships. Samsung Heavy Industries is pursuing follow-up offshore plant projects such as the second Delfin FLNG unit and Canada's Western FLNG. In April, HD Hyundai Heavy Industries signed a 627.1 billion won contract with a U.S. energy development company for Himsen engines to supply power to data centers, expanding its marine engine business into the onshore power generation market. Hanwha Ocean is putting emphasis on expanding orders for special-purpose ships. Last year, it completed its fourth special shipyard, increasing simultaneous submarine construction capacity from two to four, and is pursuing overseas special ship projects, including Canada's submarine program.