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Hyundai Heavy Ind (SEO:A009540) |
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WIKI ANALYSIS
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Hyundai Heavy Industries(SEO:A009540) is the world’s largest shipbuilding company. Hyundai Heavy Industries is solidifying its status as an integrated heavy industry company with six business divisions such as Shipbuilding, Offshore & Engineering, Industrial Plant & Engineering, Engine & Machinery, Electro Electric Systems, Construction Equipment.
In 2010, Hyundai Heavy Industries achieved sales of 22,405 billions of KRW, an increase of 6% over the previous year. In particular, Operating Margin/Profit Margin increased from 10.5% of the previous year to 15.3%.
In January 2011, Hyundai Heavy's Backlog, YTD(year to date)-delivery basis, is $49,492 millions including the new order of January.
Company Overview
History
Hyundai Heavy Industries, founded by the late Chung Ju-yung on March 23, 1972, wrote the first chapter of its shipbuilding history in June, 1974, by completing construction of the world’s largest shipyard and two 260,000-Dead Weight Tonnage(DWT) Very Large Crude oil Carrier(VLCC)s all at the same time. Hyundai Heavy Industries was ranked “World’s Top Shipbuilder” by Japanese journal Diamond in 1985, then delivered the world’s largest ore carrier in 1986, delivered the world’s largest Floating Production Storage Offloading(FPSO) in 2001 and built world’s largest LNG carrier in 2007. Since 1985, Hyundai Heavy Industries has still been ranked the largest shipbuilder in the world.
Business and Financial Metrics
In end of the December 2010, Hyundai Heavy's recorded that 28,888.1 billion of KRW of Total Assets, 109.0% of Liabilities-to-Equity Ratio and 24.9% of Debt-to-Equity Ratio, comparing to 24,872.6 billions of KRW, 153.6%, 9.1% in the previous time.
Hyundai Heavy's sales increased consistently, on the other hand margin decreased sharply to 2004, however, grew up in 2005, 2006, and 2009.
Business Divisions
- Shipbuilding
Hyundai Heavy’s Shipbuilding Division, the world’s number one shipbuilder, leads the shipbuilding industry with a 15% share of the market. The division reached the 10 million DWT production mark, and reached the milestone of 20 million DWT in 1988, 50 million DWT in 1997, and 100 DWT in 2005. Hyundai Heavy has delivered more than 1,593 ships to 258 ship-owners in 48 countries since 1972. Hyundai Heavy’s special & naval shipbuilding division, as a licensed National Defense Industrial Shipbuilder and engineering consultant for the Korean Navy, has the technology to design and build advanced submarines, naval ships and auxiliary service vessels of various proven and advanced gull forms.
- Offshore & Engineering
The offshore & Engineering Division operates the world’s largest offshore yard, covering 215 acres. Dominating the skyline is the world’s largest gantry crane, capable of lifting 1600 tons. The division has completed more than 150 projects including over 100 EPIC projects for oil and gas industry world wide and 3 million tons of offshore facilities and 5100 killometers of subsea pipelines in 49 projects for more than 30 clients worldwide.
- Industrial Plant & Engineering
The Industrial Plant & Engineering Division has 30 years of extensive experience in industrial plant projects. It provides sophisticated engineering capabilities for power plants and carries out, on a turnkey basis, all phases of project implementation including engineering, procurement, fabrication, construction, commissioning, operation, and training. The division’s core business activities comprise the Engineering, Procurement & Construction(EPC) of thermal, co-generation, combined-cycle power plants and desalination plant as well as the fabrication and supply of main equipment for nuclear power plants and oil/gas processing plants.
- Engine & Machinery
The Engine & Machinery Division is the world’s largest marine diesel engine builder with approximately 35% global market share. The division reached the production milestone of 100 million BHP(Brake Horse Power) in low-speed engines on September 29, 2010. The division is also a leading manufacturer of propellers, cargo oil pumps, ballast water management system and side thrusters playing an important role in the shipbuilding industry. Sales of diesel power plants including packaged power stations have increased dramatically in markets such as Cuba, Brazil, the Middle East, Africa, Europe and many Asian countries. Sales of industrial pumps and robot systems are also increasing rapidly. These products have become strategic items in the division’s plan for long-term growth.
- Electro Electronic System
Hyundai Heavy Industries has earned a worldwide reputation as a reliable business partner in the power industry by manufacturing and supplying the highest quality electric equipment. The division is an emerging global player in the solar and wind power fields with state-of-the-art manufacturing capabilities and a focus on providing turnkey solutions for tomorrow’s energy markets.
- Construction Equipment
Founded in 1985, the Construction Equipment Division has grown into a world class total construction equipment producer. The division has developed 92 independent models including three types of construction equipment and three types of industrial vehicles: excavators, wheel loaders, forklifts, and skid steer loaders. The hallmark of the construction equipment is economical and ergonomic design with superb performance in mind. Hyundai Heavy’s construction equipment models are marketed through 480 authorized distributor in 120 countries.
| Division Name | Sales of 2009 in KRW thousands | Sales breakdown of 2009 | Sales of 2008 in KRW thousands | Sales breakdown of 2008 |
|---|---|---|---|---|
| Shipbuilding | 9,002,641,240 | 42.6% | 9,084,857,132 | 45.5% |
| Offshore & Engineering | 3,423,456,902 | 16.2% | 3,095,131,826 | 15.5% |
| Industrial Plant & Engineering | 1,897,902,597 | 9.0% | 1,374,441,667 | 6.9% |
| Engine & Machinery | 2,771,471,593 | 13.1% | 2,522,059,761 | 12.6% |
| Electro Electronic System | 2,712,142,548 | 12.8% | 1,924,488,853 | 9.6% |
| Construction Equipment | 1,190,382,638 | 5.6% | 1,768,563,318 | 8.9% |
| Others | 144,199,218 | 0.7% | 187,538,324 | 1.0% |
| Total | 21,142,196,736 | 100% | 19,957,080,881 | 100% |
Trends and Forces
Shipbuilding industry has many variables that are affected by that - the industry has obvious correlation with the condition of shipping market, delivering ship takes a long time, most of sales are composed of export and the ship price which is source of profit is influenced by exchange rate and interest rate -, because the structure of shipbuilding industry is influenced by global economy a lot.
Solidity and Expansion of Non-shipping division
Sales of Hyundai Heavy's non-shipping division is on an upward trend. Breakdown of non-shipping division in whole sales increased, such as 44% in 2005, 58% in 2009 and 65% in 2010. Moreover, Green Energy Division was established in 2011 and provides services in the fields of solar energy, wind power, and tidal power generation that were separated from Electro Electronic System division and consolidated.
Forced by Rate of Exchange and Interest
Most payment is implemented by USD, in addition price of ship is decided at the time of obtaining order, however, payment would be collected two or three years later due to time of taking delivery ship from shipbuilder. Therefore, fluctuation of exchange rate affects fluctuation of profit. For example, after Hyundai Heavy Industries places an order for ship, then if KRW depreciate, Hyundai Heavy Industries could have greater profitability and competitive price.
Price of ship is decided by time of receiving advance payment and a discount rate of ship price decided by interest rate.
Quantity of Goods Shipped Influence Shipping Industry
Shipbuilding industry is dependent upon shipping industry influenced by quantity of goods shipped. Quantity of goods shipped is affected by global economy. Especially, market condition of shipping industry is dependent upon the flow of demand, of grain, crude petroleum and steel which have huge scale of quantity of goods shipped.
Competition
Most share of the world shipbuilding market is taken by Korea and China. Companies from these countries are in the front ranks of the world shipbuilding. Hyundai Heavy's major competitors are Samsung Heavy Ind (SEO:A010140), Daewoo Shipbuilding (SEO:A042660) which are also Korean company. These three companies are the first to third biggest shipbuilding companies in the world.
- Samsung Heavy's sales in 2010 was 13,053.9 billions of KRW, a decrease of 0.3% the previous year, however operating margin increased from 6.1% of the previous year to 7.6%.
- Daewoo Shipbuilding's sales in 2010 was 12,074.5 billions of KRW, a decrease of 3.0% the previous year, however operating margin increased from 5.5% of the previous year to 8.4%.
References
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