Hyundai Heavy posts biggest quarterly profit in 3 years on costs

[SINGAPORE] Hyundai Heavy Industries Co reported its biggest quarterly profit in three years as the world's largest shipbuilder cut costs under its restructuring efforts and its oil-refining unit posted stronger earnings.

Second-quarter net income, excluding minority interest, was 292 billion won (S$349 million), compared with a loss of 241.2 billion won a year earlier, the company said in a regulatory filing Wednesday. The profit beat the 130.3 billion-won average of 11 analyst estimates and is the largest since the first quarter of 2013, according to data compiled by Bloomberg.

The world's top three shipyards, all South Korean, plan to raise a combined 8.41 trillion won through asset and share sales as orders have dried up this year.

They are among Asian shipbuilders that are reeling from a slowing global economy and a slump in oil prices, which have led them to post losses or smaller profits last year.

Hyundai Heavy second-quarter sales dropped 17 per cent to 9.86 trillion won. Operating profit stood at 557.2 billion won, compared with a loss of 170.9 billion won a year earlier. That beat an average estimate of 159.5 billion won from 10 analysts, according to data compiled by Bloomberg.

Higher earnings from its businesses in offshore, oil refining and marine engine helped lift operating profit in the second quarter, the company said. Oil refining was the second-largest contributor to sales, while accounting for the biggest share of operating profit, 323.4 billion won, or 58 per cent.

Profit from its shipbuilding division fell 11 per cent in three months after factoring in voluntary retirement packages as part of its restructuring.

Shares of Hyundai Heavy rose 3.6 per cent to close at 115,000 won in Seoul before the earnings announcement. The stock has advanced 31 per cent this year.

Hyundai Heavy won US$4.11 billion worth of contracts in the first half, 44 per cent less than a year ago. Orders for ships fell 69 per cent to US$992 million and those for offshore projects dropped 53 per cent.

BLOOMBERG