Tighter emissions rules boost HD Hyundai Marine margin

HD Hyundai Marine Solution Co., a ship parts manufacturing and after-sales service company, has reported the highest-ever operating profit margin in South Korea’s maritime industry in the first half of this year. The record profits stem from growing demand for eco-friendly engines in line with stringent low emissions regulations.

The operating margin at HD Hyundai Marine Solution, an affiliate of the world’s largest shipbuilder HD Hyundai Heavy Industries Co. reached 14.9% as of the end of June this year.

It earned 122.4 billion won ($91 million) in operating profit on sales of 820.8 billion won in the first six months of 2024.

The margin represented a 0.08-percentage-point rise from the previous year’s 14.1%.

That was notably higher than the 4.4% for HD Korea Shipbuilding & Offshore Engineering Co., the intermediate holding company of HD Hyundai Co. at the top of the shipbuilding group’s ownership structure.

First-half results of South Korea's major shipbuilders and ship parts makers (Unit: billion won)
Company	Revenue	Operating profit/loss	Operating profit  margin (%)
HD Hyundai Marine Solution	820.8	122.4	14.9
HD Korea Shipbuilding & Offshore Engineering	12,131.1	536.6	4.4
HD Hyundai Mipo	2,129.5	6.3	0.3
Hanwha Ocean	4,819.7	43.2	0.9
Samsung Heavy Industries	4,879.7	208.5	4.3
HJ Shipbuilding & Construction	952.3	-27.6	Negative
Source: Company filings to the Financial Supervisory Service

Ship modification orders have been rising since the International Maritime Organization (IMO) set out guidelines, effective from 2023, to reduce carbon emissions from international shipping by at least 40% by 2030.

Ship owners prefer to convert ship engines into hybrid or dual-fuel ones instead of placing new vessel orders. Dual-fuel engines power ships on either liquefied natural gas (LNG) or conventional liquid marine fuels such as diesel oil. 

The IMO oversees the shipping industry and its contribution to climate change as an agency of the United Nations.

HD Hyundai Marine is an exclusive supplier of vessel engines and after-sales services, including ship modification, of its affiliated shipbuilders such as HD Hyundai Heavy Industries Co. and HD Hyundai Mipo Co. that built 36% of the world’s large ship engines last year.

It provides after-sales services for up to 25 years after ship delivery.

HD Hyundai Marine’s division that modifies dual-fuel engines posted a 29% jump to 38.3 billion won in revenue in the second quarter ending in June from the year prior.

Write to Hyeon-Woo Oh at ohw@hankyung.com
 

Yeonhee Kim edited this article