Samsung Heavy Industries (SHI) concluded a contract with Hanjin Shipping to build five 10,000 TEU container ships on August 24. The order allowed the shipbuilder to receive an accumulated amount of US$10 billion worth of orders so far this year. In addition, SHI is the first shipbuilder in the industry to reach US$10 billion in the orders received this year. It also marks the highest amount since the Korean shipbuilder was established.
SHI has so far received 66 orders worth a total of US$10.1 billion. Last year, it had received a total of US$7.7 billion of orders. SHI also has backlog orders of US$20 billion, which is equivalent to more than three years of construction work.
SHI had targeted US$7.7 billion of orders for this year, due to projection by various marine institutions at the end of 2005 that ship orders will decline in 2006 worldwide. But it has broken that record on the back of steady efforts to improve ship quality, and to develop highly economical ships.
SHI has received orders for 10 LNG ships, 11 ultra large container ships, four drill ships, FPSO and sea platforms. It has made new records in the global shipbuilding industry: the unit order price per ship was US$160 million, and high value added ships accounted for 80% of total ships ordered. The quality of ships has also been enhanced significantly.
The background of SHI's surpassing of US$10 billion order is its efforts to enlarge ships, pursue high value added quality, and increase receiving orders for sea facilities.
In detail, it received orders for 266,000© LNG ships and 10,000 TEU container ships, thus maximizing transportation capability. It also got orders to build US$580 million, the highest price ever. SHI received orders to build sea platforms worth US$34 billion, double the US$1.5 billion recorded in 2005.
Since 2006, SHI has received 75% of the total number of drill ship orders. In the LNG sector, which is a high value added sector, SHI has backlog orders of 39 ships, the biggest number in the global shipbuilding industry.
SHI upward adjusted its target order amount to US$ 12 billion, as it is currently in the middle of negotiating with many ship owners to build LNG ships and promote other oceanic projects.
SHI is enjoying robust profits. According to its first half earnings performance announced in mid August, sales revenue in the first half jumped 14.2% from a year ago to KRW3.63 trillion, while the company saw an operating profit of KRW45.3 billion in the first half, compared to a loss of KRW32.8 million in the first half.
Hyundai Securities projects SHI's operating profit to reach KRW160.2 billion in the first half, up 253% from the first half. Its forecast for next year's sales and operating profit of SHI is 6.87 trillion and KRW668 billion, respectively, projecting a 225% surge in overall profits. Korea Investment & Securities projects that SHI will continue to see robust earnings performances, on ground that SHI received the largest amount of orders in the first half among global shipbuilders. Another reason for its strong forecast for SHI is the expected boom in the LNG ship and sea plant markets.
CEO of SHI, Kim Jing Wan said, 'Now that SHI has backlog orders of three years, we will focus on improving quality in order to secure loyal clients and strengthen its position as the world's top shipbuilder.' |
