Samsung Heavy Industries Co. will continue to hedge its entire exposure to foreign exchange moves and sees little impact on its hedging strategy from new forward transaction rules introduced by the South Korean government, an executive said Monday.
"We settle the rate of return arising from a shipbuilding order--in terms of the won--at the point when the order has been made and we have maintained that hedging strategy" over the course of the global financial crisis, an executive in charge of hedging plans at the world's No. 2 shipbuilder by orders said in written comments to Dow Jones Newswires.
The executive, who declined to be named, said the company isn't easily swayed by short-term volatility in the dollar-won exchange rate when it makes its hedging plans as "forecasting foreign-exchange rate movements is difficult and our shipbuilding orders are evenly spread out throughout the year."
Concerning the currency outlook for the second half, he said chances are high that the dollar will derive strength against a broad range of currencies from investors seeking safety from risks in the global environment, including credit woes in Europe.
He forecast the dollar will weaken against the won, however, trading between KRW1,100 and KRW1,180 for the most part of the second half, compared with KRW1,223.40 late Monday in Seoul.
His comments on hedging mirror those made recently by executives in charge of forex management at Samsung's rivals, including Hyundai Heavy Industries Co. (009540.SE), Daewoo Shipbuilding & Marine Engineering Co. (042660.SE) and STX Offshore & Shipbuilding Co. (067250.SE). Executives at those companies told Dow Jones Newswires that they will likely be unaffected by stricter rules on foreign currency trading introduced by the government last month.
Samsung Heavy, however, appears to be more conservative, hedging a larger portion of its foreign exchange risks. Its 100% hedge contrasts to 70%-80% by its rivals.
As part of an effort to make the Korean banking system sturdier in the face of currency volatility, Seoul cut the size of forward foreign-exchange transactions companies can enter to a value up to the amount of revenue they seek to hedge from 125% of the expected revenue previously.
The Samsung executive said his company remains insulated from the euro-zone debt crisis in terms of orders from Europe.
In the first half of the year, Samsung Heavy received $5 billion worth of vessel and offshore facility orders, or about 63% of its target of $8 billion for 2010, sharply higher than orders of just $1.4 billion for the whole year of 2009, according to a spokesman.
On top of that, Taiwan's Evergreen Group said Friday it placed a $1.03 billion order for 10 container ships with Samsung Heavy, an indication the container shipping industry is recovering.
Samsung Heavy, which makes most of its sales overseas, receives all payments for vessel deliveries in dollars, a common practice in the shipbuilding industry, said the executive.
"We settle the rate of return arising from a shipbuilding order--in terms of the won--at the point when the order has been made and we have maintained that hedging strategy" over the course of the global financial crisis, an executive in charge of hedging plans at the world's No. 2 shipbuilder by orders said in written comments to Dow Jones Newswires.
The executive, who declined to be named, said the company isn't easily swayed by short-term volatility in the dollar-won exchange rate when it makes its hedging plans as "forecasting foreign-exchange rate movements is difficult and our shipbuilding orders are evenly spread out throughout the year."
Concerning the currency outlook for the second half, he said chances are high that the dollar will derive strength against a broad range of currencies from investors seeking safety from risks in the global environment, including credit woes in Europe.
He forecast the dollar will weaken against the won, however, trading between KRW1,100 and KRW1,180 for the most part of the second half, compared with KRW1,223.40 late Monday in Seoul.
His comments on hedging mirror those made recently by executives in charge of forex management at Samsung's rivals, including Hyundai Heavy Industries Co. (009540.SE), Daewoo Shipbuilding & Marine Engineering Co. (042660.SE) and STX Offshore & Shipbuilding Co. (067250.SE). Executives at those companies told Dow Jones Newswires that they will likely be unaffected by stricter rules on foreign currency trading introduced by the government last month.
Samsung Heavy, however, appears to be more conservative, hedging a larger portion of its foreign exchange risks. Its 100% hedge contrasts to 70%-80% by its rivals.
As part of an effort to make the Korean banking system sturdier in the face of currency volatility, Seoul cut the size of forward foreign-exchange transactions companies can enter to a value up to the amount of revenue they seek to hedge from 125% of the expected revenue previously.
The Samsung executive said his company remains insulated from the euro-zone debt crisis in terms of orders from Europe.
In the first half of the year, Samsung Heavy received $5 billion worth of vessel and offshore facility orders, or about 63% of its target of $8 billion for 2010, sharply higher than orders of just $1.4 billion for the whole year of 2009, according to a spokesman.
On top of that, Taiwan's Evergreen Group said Friday it placed a $1.03 billion order for 10 container ships with Samsung Heavy, an indication the container shipping industry is recovering.
Samsung Heavy, which makes most of its sales overseas, receives all payments for vessel deliveries in dollars, a common practice in the shipbuilding industry, said the executive.