[Company analysis] Hyundai Heavy Industries (현대 중공업)

「Hyundai Heavy Industries」is the world's largest shipbuilding company and represents the heavy industry of South Korea. This company was established in 1973, and it has maintained the largest sales in the world shipbuilding market since 1983.  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 overwhelmed their competitors with their unique equipment procurement capabilities. The number of connected employees is approximately 14,066.

 

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	Hyundai Heavy Industries Co., Ltd.
Company name (Korean)	현대중공업
Company name (Japanese)	現代重工業
Date of establishment	Thursday, March 23, 1972
Headquarters location	울산광역시 동구 방어진 순환도로 1000
Consolidated sales	1,518,255
Consolidated operating profit	29,016
Consolidated total assets	2,505,537
Consolidated capital	1,292,631
Capital adequacy ratio	51.6%
Consolidated number of employees	14,066

 

 

 

2. Summary and Features

 
The shipbuilding division of「Hyundai Engineering & Construction」, which was established in 1970, is the beginning of「Hyundai Heavy Industries」. At that time,「Hyundai Heavy Industries」grew as the leading shipbuilding company in South Korea based on the strong government policy on heavy and chemical industry. 「Hyundai Heavy Industries」was a comprehensive heavy industry company that carried out various businesses. But in April 2017, other business divisions excluding the shipbuilding and ocean divisions spun off, and「Hyundai Heavy Industries Group」was changed to holding company system.

 

After the transformation to the holding company system,「Hyundai Heavy Industries」is conducting the shipbuilding business of the「Hyundai Heavy Industries Group」, which is headed by「Hyundai Heavy Industries Holding」. More precisely, this company is in charge of the shipbuilding business as a subsidiary company of 「Korean Shipbuilding & Offshore Engineering」 together with「Hyundai Sanho Heavy Industries」and「Hyundai Mipo Shipbuilding」. In addition to shipbuilding, they also carry out marine/plant business and engine machinery business. Unlike「Samsung Industries (삼성 중공업)」, which has never participated in the naval vessels business, tis company is very actively working on the defense industry.

In the shipbuilding industry, this company cooperates with other related companies(Hyundai Mipo Heavy Industries, and Hyundai Samho Heavy Industries), they share equipment, personnel, orders, contracts, shipbuilding process, management functions. It is said that this integration contributes to the world class level of business competitiveness of「Hyundai Heavy Industries」. It is capable of building almost all type of ships, and in its unique ability to procure equipment such as marine engine, this company overwhelms their competitor such as「Samsung Heavy Industries」.

 

However, considering the fact that「Hyundai Heavy Industries」has a high degree of dependence on sales for the shipbuilding industry and this shipbuilding industry itself are easily affected by outter factors such as exchange rate, the global economy, trends in the shipping industry, so it seems that this company has a considerable risk. However, from the perspective of the「Hyundai Heavy Industries Group」which has very large volume of oil refining and chemicals sales that was expanded by continuous capital investment, the risk from the shipbuilding market became relatively small. In addition, they are planning to make「Daewoo Shipbuilding & Marine Engineering」a subsidiary , in order to strengthen their market power. If this is realized, they can secure more than 20% of the global market share.

One of the features of「Hyundai Heavy Industries」is its unique engine business. In the case of large engines for ship main propulsion, they fabricated based on the license agreements with「Wartsila」and「MAN」in-house level. As for the medium-sized engines for auxiliary engines of ship propulsion, they have their own brand "HiMSEN" engine that has 25% of world market share. And it is evaluated as highest level of competitiveness in the world engine industry.

 

 

 

3. Major Business

 

■ Shipbuilding business
It is the business that became the origin of the「Hyundai Heavy Industry Group」and is a symbolic business of the history of heavy industry in South Korea. They manufacture a wide variety of vessels, from general commercial vessels to custom-built vessels, and have the world's highest production capacity.

■Special vessel business
Since developing the "Ulsan-class", the first domestically produced warship in South Korea in 1975, this company has developed various state-of-the-art ships based on our unique technology for 45 years and have delivered them to the Navy and Marine Police. They also entered into global market by export ships to the New Zealand Navy, the Bangladesh Navy, the Venezuelan Navy and the Philippine Navy.

■ Ocean/plant business
「Hyundai Heavy Industries」handles a variety of equipment related to offshore oil and gas field development. In addition, they are engaged in the thermal power, combined thermal power, thermoelectric power plant business and the chemical industry plant business such as essential oil, petrochemical, and gas plant with Turn Key contract.

■ Engine machinery business
This company has one of the largest engine machinery business in the world. They can handle large and medium size marine engines, mobile power generation equipment, and land-based engine power generation equipment. In the engine machinery division, internal sales account for approximately 69.5% of total sales by 2019.

 

 

 

4. Financial information

 

※Unit is KRW 10 million

※The below is the financial information of 「Korea Shipbuilding & Offshore Engineering」

		2017	2018	2019
Consolidated sales		1,549,099	1,316,104	1,518,255
Consolidated operating profits		3,680	-48,136	29,016
Consolidated total assets		3,040,884	2,472,989	2,505,537
Consolidated net assets		1,237,203	1,311,096	1,292,631
Breakdown of sales	Shipbuilding	1,047,674	1,025,349	1,331,367
		-785	-63,899	28,159
	Offshore plant	401,975	227,107	145,846
		19,334	27,195	16,847
	Engine machinery	126,802	107,723	126,500
		12,005	2,186	4,937
	Electric & Electronic system	11,404
		-375
	Green Energy	25,979	34,762	46,037
		-2,279	1,390	2,219
	Construction equipment	7,113	7,831	10,600
		-6,626	-1,259	449
	Others	57,466	54,391	38,304
		-4,554	7,528	-1,015
	Internal sales	-129,316	-141,061	-180,401