HD Korea Shipbuilding & Offshore Engineering (009540) Q2 2025 earnings summary

Executive summary

• Q2 consolidated sales rose 9.7% quarter-over-quarter and 12.3% year-over-year, driven by seasonality, more working days, and productivity gains.

• Operating profit increased 11% quarter-over-quarter and 153.3% year-over-year, with stable margin growth across all divisions despite FX headwinds.

• Net income declined 26.9% quarter-over-quarter but grew 25% year-over-year, reflecting non-operating losses.

• Significant FX-related losses of KRW 46 billion were recorded, mainly due to a weaker dollar and hedging activities.

• All shipbuilding subsidiaries remain in a net cash position, totaling KRW 6.9 trillion.

Financial highlights

• Q2 sales reached 7,428.4 bn KRW, operating profit 953.6 bn KRW, and net income 447.1 bn KRW.

• Operating profit margin improved to 12.8% from 12.7% in 1Q25 and 5.7% in 2Q24.

• Non-operating losses: FX losses of KRW 589.3 billion, derivative losses of KRW 2.2 trillion, and KRW 1 trillion in forward contract valuation losses.

• One-off gain: Offshore division recognized KRW 7 billion from a change order on the Shenandoah project.

• Naval vessel division revenue grew 34.9% quarter-over-quarter to KRW 226.8 billion; OP up 5.1% to KRW 26.9 billion.

Outlook and guidance

• Management expects continued solid growth in the second half, supported by higher vessel prices, expanded project revenue recognition, and improved productivity.

• Bonus payments will be allocated evenly across quarters, reducing Q4 cost shocks.

• Overseas projects in the Philippines and India to begin generating sales as steel cutting starts in September.

• Offshore project bidding ongoing in Qatar, UAE, and Kuwait, with results expected from October through early next year.

• Cautions remain regarding foreign exchange volatility and project execution risks.