HHI Vice Chairman Kwon Oh-gap. (Photo: HHI)

Hyundai Heavy Industries (HHI) and two of its shipbuilding sister companies are showing signs of a business rebound thanks to HHI’s restructuring. Securities and shipbuilding industries have also cautiously reported that the global shipbuilding industry is bottoming out. A report released by the global shipbuilding market intelligence company Clarksons Research showed that 438 ship orders were placed in 2016, but shipbuilding orders are forecast to redouble to 834 ships in 2017. 

Hyundai Heavy Industries Group said on April 26 that HHI, Hyundai Samho Heavy Industrie, and Mipo Dockyard have landed orders worth a combined $2.3 billion to build 39 ships so far this year. 

The winning ship orders are the largest in three years since the first four months of 2014, when the three shipbuilders won 80 ship orders. The value for this year’s orders is close to $2.6 billion worth of orders the three companied won for the same period of 2015. 

They won eight ship orders worth $400 million in the first four months of last year. 

This year’s ship orders involve 13 tankers, 18 petrochemical carriers, two gas carriers, and six others. An increasing number of foreign ship owners are inquiring ship orders thanks to stable crude oil prices and a rise in global trade, an HHI official said. HHI Group said the winning of an additional 13 ship orders is to be confirmed by the end of April. The addition will raise the number and value of the orders in the first four months of this year to 52 ships worth $2.9 billion.

By company, Mipo Shipyard won 24 orders worth a combined $900 million, including 18 petrochemical carriers. HHI landed six ship orders worth a combined $800 million, and Samho won nine orders worth $600 million. The three shipbuilder’s orders were owed to the group’s restructuring. 

Of late, European ship owners tend to attach top priority to shipbuilders’ financial conditions for the timely delivery and quality of ships. The three HHI companies got high points in the category of financial condition thanks to the recent restructuring, business sources said. For instance, HHI saw its debt ratio decline from 220 percent in the end of 2015 to 175 percent by the end of 2016. It did this by restructuring businesses, returning part of wages, and disposing of non-essential assets, including stocks and real estate. HHI’s debt ratio plunged to 95.6 percent in early April due to business spinoffs. Samho Heavy Industries recently succeeded in dramatically improving its financial structure by attracting 300 billion in a pre-IPO investment from IMM Private Equity. If the investment plan gets a go-ahead from the board of directors in early June, Samho will see its debt ratio drop from 96.4 percent to 78.1 percent.

On top of the global standing of the HHI group as the world’s No. 1 shipbuilder, technology power and after-sales conditions have contributed to the group’s landing ship orders, group officials said. HHI is signing contracts with premiums versus market value, they added. HHI Group’s four spin-offs, scheduled for May 10, is seen as having a favorable impact on their shares prices.  

Chance are high that the strengthening of regulations on greenhouse gas emissions, and oil majors coping with low crude oil prices, will lead to more merchant and marine plant ship orders, they said. Samho’s attracting 300 billion won from IMM PE will likely contributing to raising stock prices of HHI Group’s four spin-off companies.