Hyundai Heavy Industries announces consolidated 3Q15 earnings

Hyundai Heavy Industries (HHI), the world’s biggest shipbuilder, issued a public disclosure of its 3Q15 earnings today. According to the disclosure, 3Q sales came in at 10.9184 trillion Korean won (hereafter “won”), operating loss at 678.4 billion won and net loss at 451.4 billion won, the company said in its press release.
 
On a quarter-on-quarter basis, sales declined 8.7%, while operating loss and net loss widened by 507.4 billion won and 209 billion won respectively, due to delays in offshore projects and lackluster sales of the construction equipment business.
 
HHI cited the following as the reasons behind the hike in operating loss: early recognition of losses from contract cancellation of a semi-submersible rig; loss provision for adverse changes in the offshore business environment such as the oil price decline; and an increase in the restructuring cost from divestiture of underperforming subsidiaries.
 
HHI also booked the cost of liquidating unprofitable overseas subsidiaries, which started in 2014, as 3Q15 losses. To be specific, HHI has sought to liquidate its JaKe subsidiary in Germany, Hyundai Cummins and Hyundai Avancis, which respectively produce wind power gearboxes, construction equipment engines and solar modules. Moreover, the company is in the process of shutting down its Taian construction equipment subsidiary in China amid the slowdown of the Chinese economy, and its Beijing subsidiary is in talks with its partner to sever joint venture ties.
 
Meanwhile, HHI reckons 4Q15 as a critical juncture for earnings turnaround.
 
As such, HHI has made unrelenting efforts to reshuffle its businesses and organization to more effectively steer towards profit. After finishing its HR efficiency enhancement program, HHI is zooming in on boosting liquidity, for instance by disposing of Hyundai Motor shares and issuing convertible bonds of Hyundai Merchant Marine shares. Furthermore, it is making preparations to delegate as much authority as possible to heads of each business division.