Samsung Heavy Industries(010140), backed by increased shipbuilding volume, grew both top line and profit in the second quarter of this year. However, operating profit fell short of market expectations as one-off bonus-related expense was reflected and the share of overseas-built crude oil tankers, which have relatively lower profitability, increased.
Samsung Heavy Industries said in a filing on the 24th that, on a consolidation basis, second-quarter revenue was 3.2307 trillion won and operating profit was 325.0 billion won on a preliminary basis. Compared with the same period a year earlier, revenue rose 20.4% and operating profit increased 58.7%. Versus the previous quarter, revenue grew 11.3% and operating profit rose 19%.
The operating margin rose to 10.1%, up from 7.6% a year earlier and 9.4% in the first quarter of this year. However, operating profit was about 18% below the securities market consensus (398.5 billion won). A Samsung Heavy Industries official said, "As we reflected previously paid bonuses (PI) in retirement benefit provision, the cumulative expense occurred all at once this quarter." The expansion of global operations (a production method that uses overseas shipyards) also had an impact, as the share of LNG carriers in merchant ship revenue edged down and the share of crude oil tankers increased.
Samsung Heavy Industries is building crude oil tankers at overseas shipyards to supplement the production capacity of the Geoje Shipyard, and related revenue began to be reflected in earnest from the second quarter. As launchings resumed for ships completed at Dry Dock No. 2 at the Geoje Shipyard, space was secured to build follow-on vessels, boosting output.
While overseas production volumes lifted revenue, they limited the scope of profitability improvement. Crude oil tankers, which are mainly built at overseas shipyards, are less profitable than liquefied natural gas (LNG) carriers or floating liquefied natural gas production facilities (FLNG) made at the Geoje Shipyard. The securities market also sees a burden from the fact that these are at the stage of building the first vessels at overseas yards, which takes time for workforce and work processes to stabilize.
That said, overall profitability improved as construction increased for LNG and LPG carriers ordered at high prices since 2024 and FLNG revenue also grew. In the merchant ship segment, the share of LNG carriers edged down and the share of crude oil tankers increased, but with higher FLNG revenue, the revenue mix between merchant ships and offshore remained similar to the prior quarter at about 75% and 25%, respectively.
Cumulative first-half revenue was 6.1330 trillion won, up 18.5% from a year earlier, and operating profit was 598.1 billion won, up 82.4%. Samsung Heavy Industries expects to comfortably achieve its annual revenue target of 12.8 trillion won set at the start of the year, as construction volume at overseas shipyards and revenue from high-priced gas carriers and FLNG increase in the second half.
Order intake is also supporting future revenue growth. Samsung Heavy Industries won $10 billion in orders from January to July this year, achieving 72% of its annual target of $13.9 billion. The shipbuilding segment reached 98% of its own target, with additional orders expected in the second half centered on LNG carriers. In the offshore segment, the company is in talks to win the Delfin FLNG No. 2 unit and the Western FLNG project.
A Samsung Heavy Industries official said, "In the second half, we will continue efforts to enhance productivity using 3X (DX, AX, RX), improve profitability, and deliver visible results in various U.S. businesses, including floating data centers (FDC) and maintenance, repair and overhaul (MRO)."