The escalating financial crisis in Europe has been a kick in the teeth to Hyundai Heavy Industries, Korea’s largest shipyard. Korea Times

Toxic Europe leaves HHI in distress

By Kim Jae-won

Hyundai Heavy Industries (HHI), the nation’s No. 1 shipbuilding company is not immune to the eurozone debt crisis, suffering from a double whammy of a poor business performance and falling stock prices.

The global shipbuilding industry is undergoing one of the toughest times in history.

European lenders, having underpinned the sector by providing 70 percent of syndicate loans, are now suffering due to their extensive exposure to debtridden countries such as Greece and Spain. Greece, a shipbuilding powerhouse, is under a strict austerity program.

HHI, Korea’s largest shipbuilder by market cap marked a net profit of 523 billion won in the first quarter, down 63.1 percent from a year ago. Its shares closed at 272,500 won on Thursday, almost half of last year’s price at 460,000 won.

The company’s lack of orders is the biggest headache as it is lagging behind its rivals, according to sources and market data.

HHI has reportedly received orders worth 3 billion won this year, far below competitors Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering (DSME), which have each received orders worth more than 5 billion won.

Analysts recommend investors to buy Samsung and Daewoo rather than Hyundai stock as they are expected to turn around earlier than the latter.

“Share prices of Samsung rebounded in the second half of 2011, and Daewoo is also expected to turn around in the first half of 2012. However, Hyundai may have to wait until next year to see its stock rise,” said Jeon Jae-cheon, an analysts from Daishin Securities in his latest report.

Jeon picked Samsung as the most promising of the three as high profitability is expected thanks to drillship orders.

Industry watchers say that a big Nigerian offshore plant project titled Egina will be a litmus test for Hyundai to see whether the No. 1 company among Korean shipbuilders could rebound. If Hyundai can receive orders for the project, it may see a big boost.

The Egina oil field is located 150 kilometers off the coast of Nigeria. It is being developed by Total Upstream Nigeria in partnership with a few other developers.

Egina is the third deep offshore development by Total in Nigeria.

It is currently under development and production is scheduled to begin in 2014 or 2015.