Invest1 publisher2 min readPublished
Hanwha Ocean books 2.89 trillion won of ships in September with over three years of work in hand
Hanwha Ocean booked 2.89 trillion won of ship orders in September with more than three years of work already in hand. That backlog makes its claim to be choosing contracts for profit believable, until margins on the new ships say otherwise.
The Investor · Invest desk
Drafted by a language model from the sources cited here and checked against its claim ledger before publication. How we use AISend a correction
What happened
- The orders included six large eco-friendly container ships for Taiwan's Yang Ming Marine Transport, along with very large gas carriers, very large crude carriers and LNG carriers.
- On September 9 the Royal Thai Navy named Hanwha Ocean preferred bidder for its next-generation frigate, worth 683.3 billion won if a final contract is signed.
- Hanwha Ocean holds approval in concept from the American Bureau of Shipping for a 60-megawatt floating data center it designed in-house.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- constraint One LNG carrier accounted for about 23.5% of September's total, so a single contract can swing Hanwha's monthly order figure and one month is weak evidence of a run-rate.
- decision With more than three years of slots filled, Hanwha can decline low-priced work without idling docks. Investors now have to judge it on price and margin per slot instead of order counts.
- capability A signed Thai frigate would add naval export work worth about as much as one LNG carrier, from a buyer that sits outside commercial shipping.
A yard with more than three years of work in hand [6] can turn down a cheap contract and still have every dock busy next year. Hanwha Ocean credits its September to that kind of selective, profit-centered ordering [5]. It also says the depth of the book lets it improve production efficiency [6].
Only one order in the month comes with a price. The LNG carrier disclosed on the 28th was worth 680 billion won [2], about 23.5% of September's 2.8918 trillion won [3][1]. The remaining 2.21 trillion won or so [2] covers six Yang Ming container ships plus VLGCs, VLCCs and LNG carriers [4]. The report does not give prices for any of them, or counts for the gas and crude carriers. From this record, then, there is no way to tell whether the container ships were priced for margin or taken to fill slots.
The numbers fit more than one reading. In one, the selectivity is real and shows up as operating margin as the September contracts are built, though they join a book already more than three years deep [6]. In another, the month is lumpy, since a single carrier is nearly a quarter of it [1]. A third is that a long book constrains a yard as much as it protects one, because a buyer who wants early delivery has to go where slots are open. I think the first reading is right in direction. It would be proved wrong if margins on contracts signed this year look like margins on the work already booked. For anyone valuing Korean shipbuilders, margin per slot is the figure to follow, and a monthly won total is contract value, not profit.
The frigate term is the more interesting one. If detailed negotiations end in a final contract, the Royal Thai Navy work adds 683.3 billion won [7]. That is about 3.3 billion won more than the LNG carrier [3], and it would take the combined figure to about 3.58 trillion won [4]. According to the report, the selection is seen as following Thailand's experience operating the first frigate Hanwha delivered [10].
The rest of the plan shows where the company is putting its effort. NH Investment & Securities said on the 22nd that Hanwha Ocean's LNG carrier and submarine pipeline remains intact, and that naval and maintenance, repair and overhaul work would expand from next year, centered on the U.S. market [8]. Hanwha is also preparing to commercialize floating data centers [9]. By the company's own account, commercial shipbuilding is meant to improve through choosier ordering and production efficiency [5][6].
What to watch
- Hanwha Ocean's operating margin on contracts signed this year compared with margins on work booked earlier, the direct test of its profitability claim.
- Whether the Royal Thai Navy frigate negotiations end in a signed contract worth 683.3 billion won.
- Any disclosure of per-ship prices for the six Yang Ming container ships and the VLGC and VLCC orders.