South Korean shipbuilding major Hyundai Heavy Industries (HHI) has wrapped up its first profitable quarter after nine quarters of posting losses.
According to a regulatory filing, HHI booked an operating profit of KRW 325.2 billion (USD 283.2m) while the company’s sales totaled in KRW 10.2728 trillion, a 7.8 % decline from the previous quarter.
“For 1Q 2016, we have returned to the black mainly due to the following reasons; the phase-out of low-price shipbuilding contracts, stabilization of manufacturing processes for offshore and industrial plant business, reduced material costs, the weakening won and noticeable performance improvement of non-shipbuilding businesses including Engine & Machinery, Electro Electric Systems and Construction Equipment,” an HHI officer said.
As explained, the company believes that the 1Q 2016 consolidated earnings have not deviated much from the annual performance goal it set up early this year.
HHI also attributes the turnaround to a series of drastic restructuring measures launched in 2014 by the incumbent top management in an effort to tide over the protracted crisis, including liquidating unprofitable businesses and overseas incorporated firms and launching of HHI Group Ship/Offshore Marketing Division by combining sales departments of its shipbuilding and offshore division for increased synergies.
In an effort to put more emphasis on its core businesses, HHI spun off the industrial machinery unit of its Engine & Machinery Division, and disaffiliated its trading arm, Hyundai Corp., from the HHI group.
“Although we have turned a profit in the first quarter of this year, we will concentrate more on cutting costs in case of a falling order backlog. Moreover, under the leadership of each division heads, we will continue to exert our utmost efforts to recover the competitive edge by realigning businesses and organizational structure,” he added.