Despite Hyundai Heavy Industries (HHI)’s restructuring and efforts to revamp its financial structure, its profitability is unlikely to improve in the near future due to a continued downturn in the world's shipbuilding and maritime industries, according to NH Investment & Securities, a Korea-based financial service provider.
“The global shipbuilding industry has continued to see sluggish demand, so HHI’s sales are projected to contract over the next 2 years. Its operating profit is anticipated to stabilize in 2016 when most of the large-scale marine plant sales are complete and sales of LPG and LNG tankers pick up. However, the phase of low profitability is likely to persist until 2017,” NH Investment & Securities predicted on October 21.
“While the global shipbuilding industry’s production capacity is estimated at 130 million DWT, 2015 YTD (year-to-date) orders stand at a mere 68 million DWT. Surpluses in shipbuilders’ production capacity have led to struggles for winning orders, so a structural improvement in profitability is difficult to make,” NH Investment & Securities added.
“Furthermore, there is a possibility of further deterioration in the onshore and offshore plant business. And loss-making overseas subsidiaries could undermine the company’s book value,” NH Investment & Securities pointed out.
