Hyundai Heavy 1Q Net Hit by Lack of High-End Ship Orders, Profit Tumbles 63%

Hyundai Heavy received orders worth $3.76 billion in the first quarter of 2012, but with a target of $30.6B set for 2012, the world's largest shipbuilder has a long way to go.

SEOUL (Dow Jones)–Hyundai Heavy Industries Co. (009540.SE), the world’s largest shipbuilder by sales, said Thursday first-quarter net profit tumbled 63% from a year earlier, hurt by a fall in high-end ship orders, but flagged an expected pickup in orders from the current quarter.

“Order volume of high-end ships won before the 2008 financial crisis almost dried out and (orders for) low-end ships such as bulk carriers were reflected in the first-quarter results,” a company spokesman said by telephone. “Higher shipbuilding plate prices also ate away at the bottom line.”

Analysts concurred with Hyundai Heavy’s positive outlook, saying that the firm is expected to receive orders to build power plants, offshore facilities and commercial ships from the second quarter.

“Hyundai Heavy has lagged behind its smaller rivals in the first quarter but upcoming orders will help buoy its bottom line for the rest of the year,” said Sung Ki-jong, an analyst at Daewoo Securities.

Consolidated net profit for the three months ended March 31 fell to KRW523.1 billion ($463 million) from KRW1.419 trillion a year earlier, the company said in a statement.

Operating profit declined 43% to KRW969.1 billion from KRW1.711 trillion, while sales were up 9.7% to KRW13.938 trillion from KRW12.701 trillion.

Quarter-on-quarter, however, the Ulsan-based shipbuilder shifted to a net profit from a net loss of KRW25.5 billion in the fourth quarter. Operating profit rose 10% on quarter from KRW879.1 billion and sales fell 4.0% from KRW14.522 trillion.

In the January-March period, Hyundai Heavy achieved $3.76 billion, or 12.3%, of its annual order target of $30.552 billion.

-By Kyong-Ae Choi, Dow Jones Newswires

Copyright © 2012 Dow Jones & Company, Inc.