From October 27 to 29, South Korea's three major shipyards successively disclosed their third-quarter results. Samsung Heavy Industries announced on October 29 that revenue was 3.1504 trillion won, operating profit was 338.4 billion won, a year-on-year increase of 19.6% and 42.1% respectively, operating profit margin was 10.7%, and cumulative operating profit in the first three quarters was 936.5 billion won. HD Korea Shipbuilding Marine announced on October 28, Operating profit increased 37.3% year-on-year to 1.4472 trillion won, and the total in the first three quarters was 4.4483 trillion won, exceeding last year’s record of 3.9045 trillion won in three quarters. Hanwha Marine announced on October 27 that operating profit increased 67.6% year-on-year to 485.7 billion won. The three companies totaled 2.2713 trillion won. (Source: Hellenic Shipping News, Summarizing the disclosures of the three companies from October 27th to 29th)
The explanation given by the report is very straightforward: high-value-added ships (Liquefied natural gas carriers, etc.) signed at higher prices in the past were successively delivered and revenue was recognized, partially offsetting the cost burden. This shows that the income statement in the third quarter reflects not the current order price, but the price difference of the earlier batch of contracts - the recognition of shipbuilding revenue lags behind the signing, and the profit is an echo of old orders.
The second clue is that the exchange rate and working hours are reversed at the same time. HD Korea Shipbuilding & Marine disclosed that its operating profit in the third quarter decreased by 70 billion won due to the decline in the exchange rate, and another 50 billion won due to the reduction in working days, totaling 120 billion won. Adding the additional costs of salary and collective agreement negotiations, its operating profit fell by approximately 12% month-on-month. Samsung Heavy Industries' revenue fell by 2.5% month-on-month due to fewer working days during the summer and Mid-Autumn Festival holidays, but operating profit still increased by 4.1% month-on-month.
The third clue is the end of the labor conflict. HD Hyundai Heavy Industries reached a final agreement on October 27 after 11 partial strikes and high-altitude protests; Hanwha Marine & Marine Engineering reached a temporary agreement on a basic salary increase of 140,000 won after 30 rounds of negotiations; Samsung Heavy Industries completed salary negotiations last month. Cost items were reflected in this quarter, and there is no longer uncertainty on the salary side in the next quarter.
The first beneficiary is the shareholders of the three shipyards. It took HD Korea Shipbuilding and Marine Engineering three quarters to complete last year's operating profit, and Samsung Heavy Industries' operating profit margin reached 10.7%. In an asset-heavy industry such as shipbuilding, double-digit profit margins usually mean that most of the ships previously contracted at low prices have been delivered (inferring that the report did not give single-ship gross profit data).
The second beneficiary is the union members. Hanwha Marine raised the basic salary by 140,000 won. HD Hyundai Heavy Industries obtained a final agreement after 11 partial strikes, and the wage cost entered the cost base of each subsequent period.
The injured party is also specific. The first is the sustainability of profit margins: a drop in the exchange rate will eat up 70 billion Korean won, which is not a variable that the shipyard can control or predict; if the Korean won continues to weaken, this negative impact will be repeated in the fourth quarter (inference, based on the fact that the report only gave the amount of exchange rate impact in this quarter, and did not give a judgment on the exchange rate path in the fourth quarter). The second is the next batch of contracted shipowners - when the shipyard holds orders signed at a high price in the previous round, the new contract quotation will front-load wages and exchange rate risks. The bargaining position has moved backward. The third is customers with low delivery priority: high value-added ship types occupy the slipway, and the schedule of ordinary ship types can only be postponed. This is an inference, and the report does not provide the schedule of each ship type.
The differences are not between the three companies, but within the coverage of this material itself.
The same set of exogenous factors of "reduction in working days" affected the two companies in different directions: Samsung Heavy Industries' revenue fell by 2.5% month-on-month, but its operating profit increased by 4.1% month-on-month; HD Korea Shipbuilding and Marine's operating profit dropped by about 12% month-on-month. The reduction in working hours should have suppressed both revenue and profits at the same time, but the results were divergent - indicating that product structure can explain profit margins better than working hours. However, the report did not give the revenue share of ship type and gross profit per ship of any company, and this explanation cannot be confirmed.
There are three gaps: none of the three companies disclosed the revenue structure of each ship type and gross profit per ship; they did not give the contract price corresponding to the delivery level in 2027 and beyond; the report also did not explain whether the "operating profit" is of the same caliber (whether it includes one-time gains and losses, and whether the scope of consolidation is consistent). When the three are superimposed, whether Samsung Heavy Industries' 10.7% operating profit margin can be maintained, this material cannot answer.
A testable inference is that the combined operating profits of the three companies in the fourth quarter continued to be under pressure or were roughly flat on a quarter-on-quarter basis, and were still positive year-on-year. The basis is that the negative impact of exchange rates and working hours is still there, and the delivery peak of high-priced orders has been partially confirmed, and the margin for improvement has narrowed. The time scale is the fourth quarter performance disclosure, which is from late January 2027 to early February according to previous years. Falsification signal: If the operating profit of HD Korea Shipbuilding and Marine in the fourth quarter turns positive quarter-on-quarter and is higher than 1.4472 trillion won, it means that the delivery pace of high value-added ships is enough to cover the exchange rate and wage costs, and this inference is not valid.
The second judgment is related to 2027: Whether profit margins can be maintained depends on whether the proportion of LNG ships in the delivery structure is maintained. The basis is that the report attributes this round of profit growth to LNG ships and other ship types that were previously contracted at high prices. Once the delivery structure falls back to conventional ship types, the price difference will narrow. False signal: If the proportion of LNG ships in the three publicly disclosed 2027 delivery structures is not lower than 2026, or the operating profit margin remains above 10%, This judgment is wrong.
1. Fourth quarter performance disclosure (expected from the end of January 2027 to early February), focusing on whether HD Korea Shipbuilding and Marine’s operating profit can turn positive quarter-on-quarter.
Second, the ship type revenue structure and single ship gross profit in the 2026 annual report - this is the only hard basis for judging the sustainability of profit margins. Currently, all three companies are missing.
3. The trend of South Korean won against the US dollar: The exchange rate has eaten up 70 billion won in the third quarter, and the impact in the fourth quarter can be directly quantified.
This article is based on public information and does not constitute investment advice.