Hanwha Ocean on track to achieve first annual profit in 4 years

[Courtesy of Hanwha Ocean Co.]

South Korean shipbuilder Hanwha Ocean Co., which celebrates its one-year anniversary on Thursday, is on track to business normalization after it joined Hanwha Group last year.

According to financial information company FnGuide Inc. on Wednesday, Hanwha Ocean, formerly Daewoo Shipbuilding & Marine Engineering Co. (DSME), is projected to post 287.2 billion won ($210 million) in operating profit in this year based on brokerage consensus.

It would mark the first annual profit since 2021.

When the company was under the management of Korea Development Bank (KDB), Hanwha Ocean’s predecessor DSME posted operating losses of more than 1 trillion won in 2021 and 2022 due to lax management and low-cost orders.

Hanwha Ocean achieved a quarterly operating profit of 74.1 billion won in the third quarter of 2023, the first black in 12 quarters.

The turnaround is attributed to the company’s selective order strategy focused on profitability and the swift recovery of production speed.

Since joining Hanwha Group, Hanwha Ocean has concentrated its order capabilities on high-value ships such as liquefied natural gas (LNG) carriers and very large ammonia carriers (VLAC).

The company also actively engaged in hiring to respond to delays caused by labor shortages. As a result, costs related to production stability, which amounted to 220 billion won in the fourth quarter of 2023, were reduced to 18 billion won in the first quarter of 2024, significantly improving productivity.

The company also benefited from its integration into Hanwha Group.

It successfully raised 1.5 trillion won through a rights offering in 2023 in which group affiliates like Hanwha Aerospace Co. took part.

The injection of funds, coupled with structural improvements, helped stabilize the company‘s debt-to-equity ratio from nearly 1,858 percent in the first quarter of 2023 to 241 percent in the first quarter of 2024.

Its market capitalization, which was around 3 trillion won at the time of Hanwha Group’s acquisition, tripled to 9.28 trillion won as of Wednesday.

Hanwha Ocean aims to expand its business portfolio in 2024, which has been focused on merchant ships, by aggressively pursuing mergers and acquisitions (M&A) in the maritime and defense sectors.

The company invested a total of 402.5 billion won in April 2024 to acquire the wind power business of the group‘s holding company Hanwha Corp.’s construction division and the plant business of its global division.

It also acquired a 21.5 percent stake in Singapore-based marine float manufacturing company Dyna-Mac Holdings Ltd. for 91 billion won this month.

In the defense sector, Hanwha Ocean is pursuing the acquisition of Australian shipbuilding and defense company Austal Ltd., which owns shipyards in the United States, to enter the U.S. military ship maintenance, repair, and overhaul (MRO) market, which is worth around 20 trillion won annually.

Industry insiders, in the meantime, question Hanwha Ocean’s capability to sustain its growth, given its recent poor performance in securing merchant ship orders.

Hanwha Ocean‘s total ship orders in 2023 amounted to $3.5 billion, lagging far behind its competitors HD Korea Shipbuilding & Offshore Engineering Co. ($22.6 billion) and Samsung Heavy Industries Co. ($8.3 billion).

The company ranked lowest among the three shipbuilders, with orders worth $3.3 billion this year as of Wednesday.