Hyundai Heavy Reports 1Q Loss

Friday, May 11, 2001
South Korea's Hyundai Heavy Industries, the largest shipbuilder in the world, reported a first-quarter loss on Friday after it was hit by losses at sister firm Hyundai Petrochemical.

But Hyundai Heavy said it would chalk up large profits by the end of the year, as a flood of backlogged orders would keep the yard busy for the next two and a half years.

Hyundai Heavy said it incurred a 81.9 billion won ($62.92 million) net loss during the January-March period, compared to a net profit of 42.7 billion won a year earlier.

The company said its EBIT (earnings before interest and taxes), or operating profit, during the first quarter of this year rose to 187.6 billion won, up 9.5 percent from the same period last year.

The company's sales in the three-month period were 1.8 trillion won, up 17.6 percent from a year earlier.

"Sales of our ships, marine diesel engines and electronics control systems rose steadily," a company spokesman said.

Company officials said the first-quarter loss stemmed from a losing investment at unlisted sister firm Hyundai Petrochemical.

"Hyundai Heavy had to clean up 260 billion won in losses at Hyundai Petrochemical," said a spokesman for Hyundai Heavy. "But we are confident of making a substantial amount of net profit this year, aided especially by the weak won."

Analysts said the shipbuilder's financial ties with other ailing Hyundai Groupfirms had hit the company's share price.

"Given Hyundai's prowess in the shipbuilding industry, its shares are quite undervalued," said an analyst at Dongwon Economic Research Institute. "But its connections with other Hyundai firms seem to justify the weak share prices."

To reduce investor concern about the burden of helping sister firms, Hyundai Heavy has said it would spin off from its parent Hyundai Group by the end of this year.

It said unlisted Hyundai Petrochemical, in which Hyundai Heavy has a 49.8 percent stake, would be sold by year-end.

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