South Korea's three major shipbuilders — HD Hyundai Heavy Industries, Hanwha Ocean, and Samsung Heavy Industries — all reported double-digit operating margins in the second quarter of 2026, though the gap between them widened significantly. The divergence is largely attributed to differing foreign exchange hedging strategies, as high-value vessels such as liquefied natural gas (LNG) carriers, ordered several years prior, began flowing through to recognized revenue. The three companies together represent a dominant share of global high-value vessel construction, particularly in the LNG carrier segment, making their financial results a closely watched barometer for the broader shipbuilding cycle.

HD Hyundai Heavy Industries and Hanwha Ocean each posted operating margins near 15%, while Samsung Heavy Industries came in slightly above 10%. Industry analysts cite the differing ratios of foreign exchange hedging — the practice of locking in future exchange rates to mitigate currency volatility — as a primary driver of the margin disparity. Shipbuilding contracts typically span three to four years from order to delivery, with revenue and profit recognized incrementally based on construction progress. Since contracts are denominated in U.S. dollars, a higher won-dollar exchange rate (a weaker Korean won) boosts reported earnings. This structural lag means that quarterly results today reflect order intake decisions and exchange rate levels from multiple years prior, underscoring how treasury policy can rival operational efficiency as a determinant of profitability in export-heavy industries.

According to shipbuilding industry data released on July 31, HD Hyundai Heavy Industries recorded second-quarter revenue of 6.3322 trillion won, operating profit of 1.0399 trillion won, and an operating margin of 16.4%. Hanwha Ocean reported revenue of 5.4432 trillion won, operating profit of 736.1 billion won, and an operating margin of 13.5%. Samsung Heavy Industries posted revenue of 3.2307 trillion won, operating profit of 325 billion won, and an operating margin of 10.1%.

Samsung Heavy Industries employs a 100% FX hedging policy at the time of order intake, fixing the exchange rate at the level prevailing when each contract is signed. Approximately half of the revenue recognized in the company's second-quarter results was tied to orders placed in 2022–2023, when the exchange rate hovered around 1,300 won. In its earnings presentation, Samsung Heavy Industries disclosed that about 20% of second-quarter revenue originated from 2022 orders and roughly 30% from 2023 orders.

The average annual exchange rates in 2022 and 2023 were 1,292 won and 1,305 won, respectively. With the average exchange rate in the second quarter of 2026 standing at 1,502 won, the company effectively forfeited potential currency-related gains due to its hedging approach.

Samsung Heavy Industries indicated it expects to realize FX benefits once volumes contracted during 2024–2026 — when the exchange rate ranged in the mid-1,400 to 1,500 won level — begin to be reflected in revenue. Illustrating this lag, two LNG carriers ordered in June 2023 for delivery in February 2028 were booked at an exchange rate of 1,294.9 won. By comparison, an LNG carrier ordered in July 2026 for delivery in January 2029 was booked at a rate of 1,528.6 won.

Bae Gi-yeon, an analyst at Meritz Securities, said: "Samsung Heavy Industries still has workloads tied to exchange rates around 1,300 won due to its 100% FX hedging policy, which is why its profitability is lower than rivals." He added: "Once workloads ordered in the 1,400–1,500 won range are reflected, the relative weakness will be resolved."

Within the shipbuilding and securities industries, HD Hyundai Heavy Industries' FX hedge ratio is estimated at approximately 75%, while Hanwha Ocean's is estimated at around 10%.

Hanwha Ocean achieved a record-high operating margin of 22.7% in its merchant ship segment during the second quarter. By revenue share, orders from 2024 accounted for 50%, while orders from 2023 and 2025 each represented 25%. The rising exchange rate thus translated into gains under a largely unhedged revenue structure. However, Hanwha Ocean noted that beyond favorable currency effects, cost improvements driven by productivity gains and design optimization also contributed to stronger profitability.

Source: ChosunBiz