Hanwha Ocean aims to swing back from 4Q23 losses

[Photo by MK DB]

Hanwha Ocean, which surprised onlookers by turning a profit in the third quarter of 2023, returned to losses in the fourth quarter of the year, primarily due to an increase in one-time costs. But the company is optimistic about returning to profitability from 2024 onwards, thanks to the delivery of high value liquefied natural gas (LNG) carriers.

According to an electronic disclosure filing with the Financial Supervisory Service (FSS) on Wednesday, Hanwha Ocean’s fourth-quarter revenue for 2023 was 2.23 trillion won ($1.67 billion) on a consolidated basis, up 16.4 percent compared to the previous quarter. But the company’s operating profit, which was 74.1 billion won in the previous quarter, turned into a loss of 48.8 billion won and it was unable to turn an annual profit.

Hanwha Ocean attributed the operating loss to one-time costs incurred for wage increases aimed at stabilizing the production process and special support funds for partner companies.

The company anticipates ending the annual loss and swinging back to profitability in 2024. The formal delivery of LNG carriers, classified as high-value vessel types, is expected to pick up during the year, resolving the backlog created by the large-scale container ship deliveries secured in 2021 and early 2022 at low prices.

Hanwha Ocean is expecting the delivery of more than 20 LNG carriers and large container ship orders in the first half of 2024, almost clearing the backlog from the low-priced orders secured in 2021 and 2022. According to FnGuide, the market consensus for Hanwha Ocean’s operating profit in 2024 is 318.9 billion won, signaling a return to profitability. Quarterly performance estimates also suggest positive figures, with profits expected to be 58.8 billion won in the first quarter and 72.7 billion won in the second quarter of the year.

The company plans to continue its selective order strategy, focusing on high-value vessel types, particularly LNG carriers, in 2024. Notably, there is a significant improvement expected in the LNG carrier order performance, which was limited to five ships during the previous year. The potential order for 12 LNG carriers for the second Qatar project is expected to take shape in the first quarter of 2024.

In a bid to enhance profit margins, Hanwha Ocean is reportedly mulling securing orders for Q-MAX class LNG carriers, which are significantly larger than the standard-sized LNG carriers.