According to industry sources on the 22nd, the government recently received a message from the Polish government, which is in the process of building its next submarine, that it is concerned about the possibility of fulfilling the contract due to overheated competition from Korean shipbuilders.
Both companies are making all-out efforts to win this project. HD Hyundai Heavy Industries held a promotion day in Poland on the 8th and introduced its own 2,300-ton export submarine and total solution.
On the 3rd, Hanwha Ocean attended MSPO 2024, the largest defense exhibition in Eastern Europe, and signed a memorandum of understanding (MOU) with Polish defense group WB Group for cooperation in the submarine business. “The MOU aims to strengthen cooperation between the two companies in order to win the Orka submarine construction project,” Hanwha Ocean said in a press release at the time.
Conflicts between LIG Nex1 and Hanwha are also being raised. LIG Nex1 said last month that it signed an export contract with the Iraqi Defense Ministry for the Heavenly Palace-II medium-range interceptor system, but the two sides are confronting Hanwha over the delivery date, delivery price, and whether to reach an agreement in advance.
The Cheongung-II is a collaborative product jointly developed by LIG Nex1 and Hanwha. The missile and integrated system are produced by LIG Nex1, the radar is produced by Hanwha System, and the launcher and vehicle are produced by Hanwha Aerospace.
While the growing demand for overseas defense is overheating competition among domestic companies, each company's profitability is improving as a series of companies win export contracts.
Shipbuilders HD Hyundai Heavy Industries and Hanwha Ocean's sales rose 32.26 % and 52.43 % year-on-year in 2023, respectively. Likewise, defense contractors rose 3.95 % for LIG Nex1, 32.56 % for Hanwha Aerospace, and 12.12 % for Hanwha Systems compared to a year ago.
Operating profit also increased sharply during the same period. HD Hyundai Heavy Industries succeeded in turning surplus, while Hanwha Ocean reduced its deficit from KRW -1.61 trillion to KRW -196.5 billion. LIG Nex1 saw a 4.08 % increase, Hanwha Aerospace saw a 72.65 % increase, and Hanwha Systems saw a 137.60 % increase.
Defense companies are expected to have a good third quarter this year. The consensus, which is the average forecast of brokerage firms, is for operating profit to increase by at least 20 % and as much as 300 % year-on-year.
Over the past three years, All of them have secured successive export contracts to European, Middle Eastern and Anglo-American countries, and has ample backlogs of orders. They have secured more than three years' worth of work.
As of the first half of this year, HD Hyundai Heavy Industries had an order backlog of KRW 46.33 trillion and Hanwha Ocean KRW 29.33 trillion. They are LIG Nex1 worth KRW 19.01 trillion, Hanwha Aerospace worth KRW 30.10 trillion and KRW 6.63 trillion.
Shin Haeju (hjs0509@fntimes.com)
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