Hyundai Heavy's profit beats expectations on offshore business

[SEOUL] Hyundai Heavy Industries Co, the world's biggest shipbuilder, reported first-quarter profit that beat analyst estimates as the company cut costs and improved earnings from its offshore business.

Net income reached 208.6 billion won (S$245.76 million), the first profit in 10 quarters, compared with a loss of 138.8 billion won a year earlier, according to figures released by the company Tuesday. Analysts expected profit of 93.8 billion won, according to the average of 10 estimates compiled by Bloomberg.

Hyundai Heavy said it has fulfilled all orders of low-priced ships and the company can now focus on winning higher margin contracts. South Korea's shipbuilding industry, home to three of the world's biggest manufacturers, is reeling from a slowing global economy and a slump in oil prices.

Hyundai Heavy and other Asian yards reported losses or posted smaller profits last year as a drop in crude prices forced oil companies and rig owners to cancel offshore projects and delay deliveries.

"The offshore business has stabilized," Hyundai Heavy said in the statement. "The company will continue to focus on cutting costs." First-quarter sales fell 16 per cent from a year earlier to 10.3 trillion won.

Shares of Hyundai Heavy rose as much as 7.8 per cent in Seoul trading, the largest intraday gain since July 2015. The stock gained 4.6 per cent to 114,000 won as of 11.01 am.

Oil prices have fallen by more than 50 per cent in the past two years amid volatility in global markets, brimming US crude supplies and the expectation of increased supply from Iran. Brent traded at US$44.94 a barrel as of 9.52 am in Singapore Tuesday.

BLOOMBERG