HJ Shipbuilding & Construction’s shipbuilding division is continuing to improve its performance, supported by growth in commercial vessel construction volume and its business in special-purpose ships and maintenance, repair and overhaul (MRO) of naval vessels. In the first half of this year, the shipbuilding division generated operating profit of KRW 81.7 billion, accounting for 91% of the company’s total operating profit. As of the end of June, the shipbuilding division’s order backlog exceeded KRW 1.9 trillion.

On a consolidated basis, HJ Shipbuilding & Construction posted first-half revenue of KRW 1.2713 trillion and operating profit of KRW 89.4 billion. Compared with the same period a year earlier, revenue increased 38.5%, while operating profit rose more than eightfold. Net profit came to KRW 88.1 billion, swinging to a surplus.

The improvement in performance was driven by shipbuilding. First-half revenue from shipbuilding was KRW 678.6 billion, up 75.5% from KRW 386.6 billion in the same period last year. Operating profit was KRW 81.7 billion, accounting for 91.4% of the total operating profit of KRW 89.4 billion. The operating margin of the shipbuilding division is about 12%.

The construction division posted revenue of KRW 584.4 billion and operating profit of KRW 7.8 billion. In the first half of this year, revenue from the shipbuilding division significantly exceeded that of the construction division. This was because commercial vessel construction volume increased recently, driving up both revenue and profit in the shipbuilding division.

● Shipbuilding order backlog of KRW 1.9043 trillion…securing work in special-purpose and commercial vessels

The secured workload also remains substantial. As of the end of June this year, HJ Shipbuilding & Construction’s total order volume in the shipbuilding division stood at KRW 3.5719 trillion. Of this, KRW 1.6676 trillion has been delivered, leaving an order backlog of KRW 1.9043 trillion.

Special-purpose vessels account for the largest share of the order backlog. Of the KRW 1.8273 trillion in total orders for special-purpose vessels, KRW 781.2 billion has been delivered, leaving KRW 1.0461 trillion outstanding. For commercial vessels, KRW 853.0 billion has been delivered out of total orders of KRW 1.6486 trillion, resulting in an order backlog of KRW 795.6 billion. In the repair segment, KRW 33.4 billion has been executed out of total orders of KRW 96.0 billion, leaving a backlog of KRW 62.6 billion.

In particular, commercial vessels are making a larger contribution to earnings as previously secured container ships enter full-scale construction. Since re-entering the commercial vessel market, HJ Shipbuilding & Construction has continued to win orders, focusing on eco-friendly container ships.

In September last year, the company won an order worth about KRW 640 billion from Greek shipping company Navios Maritime Partners for four 8,850 TEU-class methanol-ready container ships. With construction of existing order volumes also under way, newbuilding volume this year is expected to increase compared with last year.

For ships, the total contract value is not recognized as revenue at the time of order; revenue is recognized according to construction progress. As previously secured container ships moved into the construction phase, both the scale and profitability of the shipbuilding division improved this year.

The company is also continuing to secure eco-friendly ship technologies. HJ Shipbuilding & Construction is building methanol-fueled container ships and in June completed development of a 10,000 TEU-class biofuel-powered container ship. In response to the International Maritime Organization’s (IMO) tighter environmental regulations, the company plans to strengthen its competitiveness in winning orders for eco-friendly commercial vessels.

● First U.S. Navy MRO order…exporting special-purpose vessel experience overseas

Together with commercial vessels, special-purpose ships and the repair business form another pillar of the shipbuilding division. HJ Shipbuilding & Construction has been building naval vessels for more than 50 years. It has built large transport ships, high-speed landing craft, patrol boats and multi-purpose training support vessels, and has carried out major overhauls and performance upgrade projects for existing vessels.

Recently, leveraging this experience, the company has entered the U.S. Navy MRO market. In December last year, HJ Shipbuilding & Construction won the mid-life overhaul contract for the 40,000-ton class logistics support ship “USNS Amelia Earhart,” ordered by the U.S. Naval Supply Systems Command. This is HJ Shipbuilding & Construction’s first U.S. Navy MRO project.

The vessel entered the Busan Yeongdo Shipyard in January this year. In the same month, HJ Shipbuilding & Construction signed a Master Ship Repair Agreement (MSRA) with the U.S. Naval Supply Systems Command. It is the third Korean shipbuilder to sign such an agreement and the first among mid-sized shipyards. Through the MSRA, the company can participate over the next five years in bids for MRO projects for U.S. Navy support ships and combat ships.

Orders for repair work have also increased. As of the end of June, total orders in the repair segment stood at KRW 96.0 billion, up 42% from the same period last year. The order backlog is KRW 62.6 billion. If the company secures additional repair projects, including U.S. Navy MRO, it will be able to develop another revenue source for the shipbuilding division in addition to its current commercial and special-purpose vessel businesses.

HJ Shipbuilding & Construction plans to seek additional U.S. Navy MRO orders and expand exports of naval vessels in the second half of the year. In July, it was selected as the lead institution for the Korea-U.S. international joint shipbuilding technology cooperation project and launched development of friction stir welding (FSW) technology using artificial intelligence (AI) in collaboration with San Diego State University in the United States. This is a technology for joining aluminum alloys and other materials, and can be applied to the construction and MRO of special-purpose vessels.

The company’s Yeongdo Shipyard is the first steel ship shipyard in Korea, established in 1937. It faced difficulties after 2009 due to the global shipbuilding downturn and a decline in orders, but resumed commercial vessel orders after a consortium led by Dongbu Construction acquired then-Hanjin Heavy Industries & Construction in 2021. In 2022, the company changed its name to HJ Shipbuilding & Construction.

● Construction division continues public-sector centered orders

The construction division is also securing new projects, focusing on public works and redevelopment schemes. The company’s policy is to maintain shipbuilding and construction as separate business pillars and to pursue selective order-taking with an emphasis on profitability.

In June, the company won a section 3 contract for the Jecheon–Yeongwol Expressway, worth about KRW 210 billion, ordered by the Korea Expressway Corporation. In July, it secured the KRW 257.2 billion project to build BEXCO Exhibition Center III, ordered by the Busan Metropolitan City government. HJ Shipbuilding & Construction is participating in the consortium with a 40% stake.

Last month, it also won the section 4 construction work for the Second Gyeongchun National Highway, worth KRW 174.0 billion, ordered by the Wonju Regional Office of Construction Management under the Ministry of Land, Infrastructure and Transport. HJ Shipbuilding & Construction is serving as the lead company in the consortium, with a 60% stake. In the housing sector, the company is targeting new orders mainly in redevelopment and reconstruction projects, selectively pursuing business based on project viability.

HJ Shipbuilding & Construction plans to continue selective, profitability-focused order-taking and schedule and risk management in the construction division, while in the shipbuilding division it intends to ensure the smooth construction of secured commercial and special-purpose vessel volumes and to secure additional workload such as U.S. Navy MRO and overseas naval vessels.

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