[Company analysis] Samsung Heavy Industries Co., Ltd. (삼성 중공업)

「Samsung Heavy Industries Co., Ltd. (삼성 중공업)」is one of the best shipbuilding companies in the world, with strength in high value-added ships, especially LNG tankers. In Korea, It is one of the three largest shipbuilding and marine industry companies(「Hyundai Heavy Industries(현대 중공업)」,「Daewoo Shipbuilding & Marine Engineering(대우 조선해양)」and「Samsung Heavy Industries(삼성 중공업)」). This company has the world top class technology in the shipbuilding industry. Besides, they have not engaged in the construction of warships such as destroyers operated by the Navy. The number of connected employees is approximately 10,008. 

 

1. Company Profile

2. Summary and Features

3. Major Business

4. Financial Information

 

 

 

1. Company Profile

 

※Unit is KRW 10 million, as of 2019

Company name	Samsung Heavy Industries Co.,Ltd.
Company name (Korean)	삼성중공업
Company name (Japanese)	サムスン重工業
Date of establishment	1974년 8월 5일 월요일
Headquarters location	경기도 성남시 분당구 판교로227번길 23
Capital	315,057
Consolidated sales	734,965
Consolidated operating profit	(61,658)
Consolidated total assets	1,360,008
Consolidated capital	524,893
Capital adequacy ratio	38.6%
Consolidated number of employees	10,008

 

 

 

2. Summary and Features

 
「Samsung Heavy Industries」was established in 1974, as a subsidiary of Samsung Group based on the heavy chemical industry development plan of the South Korean government. Basically, they have a shipbuilding and marine department that handles shipbuildings and offshore platforms, and a civil engineering department that carries out construction and civil engineering work. However, as the 2019 standard, the sales ratio of the shipbuilding and marine department exceeds 99%, so this company can be considered as a  shipbuilding company. Currently,「Samsung Heavy Industries」specializes in high-profitability businesses such as high value-added ships and marine equipment.

In the past 1983, this company bought the heavy machinery division of「Korea Heavy Industries (한국 중공업)」. Then in 1984, they entered into the forklift market with a forklift technical cooperation agreement with the US「Clark Material Handling Company」. In March 1985, this company established research center for heavy machinery and signed a production technology partnership agreement for bulldozers, wheel loaders and motor graders with 「Komatsu Ltd.(小松製作所)」. The heavy machinery business of「Samsung Heavy Industries」had a fairly high domestic market share in the first half of 1998, excavators (32.5%) and forklifts (26.7%). However, due to intensifying competition in the domestic market, this business was eventually sold separately to「Volvo Cars」and「Clark」on June 30, 1998.

In 1993, this company entered the construction industry and become listed on Korean stock market. In addition, they entered into a technical tie-up with「Nissan Motor(日産自動車)」and jump into the commercial vehicle business to launch 「Samsung Motors(삼성 자동차)」. This is similar case with the「Hyundai Motor Company (현대 자동차)」and「Kia Motors (기아 자동차」that introduced manufacturing technology from「Mitsubishi Motors (三菱自動車工業)」and「Mazda Motor(マツダ)」, respectively. The problem was, when Samsung released its first passenger car model "SM5", South Korea faced the Eastern asian economic crisis. At the time, Samsung decided to abandon the automobile business due to the "Big Deal" policy of the Korean government. As a result, 「Renault S.A.」 acquired Samsung's automobile business in April 2000.

From this point,「Samsung Heavy Industries」was transformed into a substantial shipbuilding and marine company. They built Korea's first large passenger ship and offshore oilfield development ship, and succeeded in developing the original model of the membrane type LNG tanker for the first time in the shipbuilding industry. In 2001, they developed an electric LNG tanker, a polar drillship, and an icebreaker tanker. With the booming of the world shipbuilding industry from 2003 to 2008, demand for container ships and LNG tankers has increased rapidly. Along with this,「Samsung Heavy Industries」grew into a world-class shipbuilding company.

 

 

Current status of 「Samsung Heavy Industries」 

In 2019, shipbuilding companies around the world had received an order of 45.5 million tons, which is relatively small compared to the same period of 2018(64.8 million tons). At that time, orders are decreasing for all types of ship except of LPG tankers and cruise ships. Even under such circumstances,「Samsung Heavy Industries」 received an order for 4,841 thousand GT based on 2019 standards, outperforming 「Hyundai Heavy Industries(4,473GT)」and「Daewoo Shipbuilding Marine(3,530)」.

However, in the case of South Korea, the domestic shipping market is very small size,  because the shipping industry itself is relatively weak. Moreover, it is pointed out that the shipbuilding business of「Samsung Heavy Industries」is highly dependent on import for equipments for high value-added ships as a risk. In addition, the financial structure was not improved enough, because they had been experienced the deterioration in business performance since the middle of the 2010s.

Due to the spread of coronavirus in the first quarter of 2020, demands for the shipbuilding was decreased and the global order volume decreased by 71% compared to the previous year. However, on June 1, 2020, it was revealed that「Qatar Petroleum」, a Qatar national oil company, has signed a contract with「Hyundai Heavy Industries」, 「Daewoo Shipbuilding & Marine」, and「Samsung Heavy Industries」 for LNG carriers of about 23.6 trillion KRW. Still, the order details such as quota for each manufacturer was not disclosed. Qatar, the world's largest LNG producer, plans to increase its annual LNG production from 77 million tons to 126 million tons by 2027.

 

 

 

3. Major Business

 

■ Shipbuilding and Marine Business
「Samsung Heavy Industries」is a company with a very high percentage of high value-added ship orders at 80%. In addition, they actively use robots in shipbuilding process, and their production automation rate has reached 70%. Currently, LNG carriers, which are the biggest strength of「Samsung Heavy Industries」, have achieved the top share in the world. This shipbuilding and marine business accounts for over than 99% of total sales.

■ Civil engineering business

 

 

 

4. Financial information

 

※Unit is KRW 10 million

		2017	2018	2019
Consolidated sales		790,123	526,512	734,965
Consolidated operating profits		-52,416	-40,925	-61,658
Consolidated total assets		1,381,811	1,428,289	1,360,008
Consolidated net assets		579,745	674,628	524,893
Breakdown of sales	Shipbuilding and Marine business	784,880	523,660	732,610
		-47,640	-36,990	-56,130
	Civil engineering business	5,240	2,850	2,360
		-700	-370	-660

 

 

 

 

Sales record by business section		2017	2018	2019
Shipbuilding and Marine business	Export	882,320	590,970	704,880
	Domestic sales	2,900	2,830	59,790
	Domestic salesTotal	885,220	593,800	764,670
Civil engineering business	Export	-	-	-
	Domestic sales	6,330	4,110	2,880
	Total	6,330	4,110	2,880
Internal sales・Adjustments		-101,430	-71,400	-32,580
Total		790,120	526,510	734,970