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 increased working days, seasonality, and productivity gains.

• Operating profit increased 11% quarter-over-quarter and 15.3% year-over-year, with 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 and additional non-operating losses from derivatives and forward contracts were recorded.

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

Financial highlights

• Q2 sales reached 7,428.4 bn KRW, up 9.7% sequentially and 12.3% year-over-year; operating profit was 953.6 bn KRW, up 11% sequentially and 15.3% year-over-year.

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

• FX losses: KRW 589.3 billion; derivative losses: KRW 2.2 trillion; forward contract valuation losses: KRW 1 trillion.

• One-off gain: KRW 7 billion change order in Offshore division (Shenandoah project).

• Incentive bonuses for H1 reflected in Q2, with further adjustments expected quarterly in H2.

Outlook and guidance

• Expectation of continued solid growth in H2, with productivity and utilization rates improving.

• Management expects continued growth, supported by higher vessel prices, expanded project revenue recognition, and improved productivity.

• Offshore division anticipates project awards in Qatar, UAE, and Kuwait, with results expected from October through early next year.

• Market demand for target segments remains robust, supported by environmental regulations and fleet replacement needs.

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