HD Hyundai Mipo, a shipbuilding subsidiary of HD Hyundai Group, is expected to be the only shipbuilder in South Korea to record a loss in the first quarter of this year due to a large number of low-priced ship orders in hand and investment in production stabilization costs, according to Yonhap News.
HD Hyundai Mipo is likely to post an operating loss of 15.1 billion won ( about $10.97 million) in the first quarter of this year, marking the company’s sixth consecutive quarterly loss, according to an earnings forecast by South Korean financial institution F & Guide. Following a loss of 54.7 billion won in the fourth quarter of 2022, HD Hyundai Mipo posted operating losses of 27.4 billion won, 52.5 billion won, 7.9 billion won and 65.2 billion won in the first, second, third and fourth quarters of 2023, respectively.
The profitability of HD Hyundai Mipo has been contrasted with that of HD Hyundai Samho, which became the first major shipbuilder to achieve profitability in 2022. Samsung Heavy Industries, HD Hyundai Heavy Industries and Hanwha Ocean made profits in the first, second and third quarters of last year, respectively. Many both within and outside the industry believe that shipbuilders need to clear low-priced orders before the industry enters a boom period to improve their performance.
According to the report, one of the reasons for HD Hyundai Mipo’s operating loss is the large number of low-priced orders it holds. Low-priced orders contracted through 2022 are expected to account for about 83% of this year’s results, which is not conducive to improving profitability. Another unfavorable factor is the presence of huge production stabilization costs, which amounted to 25 billion won in the fourth quarter of last year and will be reflected in this year’s first-half results.
Between 2021 and 2022, HD Hyundai Mipo’s vessel diversification program was under pressure, with low demand for the company’s backbone vessel types causing it to keep pumping in resources and costs to address production disruptions. F & Guide expects that HD Hyundai Mipo will turn a profit this year, with an annual operating profit of KRW 12.1 billion ( about $8.789 million).
HD Hyundai Mipo is currently expanding its order book based on high value-added vessels to improve its performance. So far this year, HD Hyundai Mipo has secured orders for 44 new vessels worth $2.71 billion, which is 87.3% of its annual target of $3.1 billion.
