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HHIC delivers its highest operating income and operating margin in construction since 2011
- In shipbuilding, successful bidding and a green light in future businesses as well such as retrofit
The global shipbuilding company’s cumulative operating income in construction for the 3rd quarter reached KRW 26 billion, already exceeding last year’s achievement (KRW 19.8 billion). This success is attributable to increase in orders and profitable construction sites.
In terms of operating margin, operating profit which had been in the red until 2016 turned to the black in 2017 with 2.13%. Then, the figure has increased to 2.35% in 2018 and 4.40% this year, showing growth for 3 consecutive years. In fact, the operating margin is the highest since 2011 (6%). It appears that growth in public constructions and housing business has played a big role for this success.
In public constructions, for example, HHIC signed KRW 530 billion contracts in construction, civil engineering and plant this year only. They include Pangyo Techno Valley Bridge & Complex Construction Project, Yangsan Integrated Energy Facilities and Incheon International Airport Passenger Terminal 2 Expansion Project in addition to the Busan Opera House Project which was contracted last year.
The order backlog also turned into growth. It was KRW 1.6069 trillion in 2017 and slightly dropped to KRW 1.5645 trillion in 2018. However, it bounced back to KRW 1.739 trillion as of the end of the 3rd quarter, 11% higher than the previous year.
Such rebounding was possible thanks to remarkable achievements in redevelopment under the reinforcement of housing business. Recently, the construction company signed various redevelopment and reconstruction projects such as Incheon Gyeongdong-Yulmok Redevelopment, Wonju Segyeong 1-cha Reconstruction and Yongin Mohyeon Redevelopment (Zone I) and owns nearly KRW 2-trillion order backlog for non-started construction projects additionally.
In October, Daesin Haemoro Central caused a sensation in house subscription by successfully contracting all apartment units at Seodaesin-dong, Busan, upgrading its brand value.
In shipbuilding as well, HHIC has won bids for naval ships and government boats despite unfavorable market conditions for domestic mid-sized shipbuilders. Specifically, the multinational shipbuilder signed a KRW 246 billion contract for building 4 patrol killers in October. Early this month, the company also signed a KRW 70 billion contract with the Korea Marine Environment Management Corporation to build one multi-purpose very large response vessel. It is also anticipated that HHIC would win additional large orders in December.
The nation’s leading shipbuilding company has also accelerated profit-making businesses. According to the International Maritime Organization (IMO)’s 2020 environmental regulations, the South Korean shipbuilder has prepared for retrofit business which provides technology and services for installing the desulfurization system ‘scrubber’ for years.
Thanks to such efforts, HHIC signed a KRW 8 billion contract with Dongjin Shipping in February to install SOxScrubber and planned to complete the project until the end of this year. In April, the company signed a technical cooperation agreement with Hyundai Global Service, the largest ship repair & maintenance service provider in the Republic of Korea, and has been providing engineering services for retrofitting SOxScrubber.
HHIC aims to take such eco-friendly retrofit business as its future growth engine, not just one-time event, and promote sales activities, targeting foreign shipping companies.
It also plans to sell its Dong Seoul Terminal land and building to Shinsegae Dong Seoul PFV at KRW 402.5 billion in October. Furthermore, HHIC’s Yeongdo Shipyard situated near the Busan North Port Redevelopment Project site is deemed as the company’s most valuable asset.
An official from HHIC said, “All our employees are committed to make our best efforts to upgrade our corporate values by reinforcing our company’s competence and securing profitability and solid ground for growth”.