November 25, 2024

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An image of a liquefied natural gas carrier built by Samsung Heavy Industries (Samsung Heavy Industries)

Samsung Heavy Industries scored a 4.57 trillion won ($3.43 billion) order with a Middle Eastern shipowner -- the single largest contract in its history -- to build 15 liquefied natural gas carriers, the South Korean shipbuilder said Tuesday.

The 174,000-cubic-meter LNG carriers will be delivered to the shipowner in phases through October 2028. The previous record for the single biggest contract was the 3.96 trillion won deal signed with Taiwan-based shipping company Evergreen Marine for 16 methanol-powered container ships in July last year.

With the latest record-breaking contract, Samsung Heavy Industries has already secured $3.7 billion worth of backlog orders this year, an equivalent to over half of last year’s entire orders worth $8.3 billion. The shipbuilder announced last month that it had secured orders worth 315 billion won for two very large ammonia carriers, or VLACs, with an Oceania-based client.

Pointing out that the backlog order for LNG carriers, which are high-value ships, reached 90 units, Samsung Heavy Industries said it has set solid ground for a stable performance. The shipbuilder’s total backlog orders are estimated at over $30 billion, enough for three years of workload.

“Because we secured quite a lot of workload with this large-scale order, the stance of selecting orders based on profitability will be further strengthened,” said a Samsung Heavy Industries official.

Meanwhile, the shipbuilder is expected to post the first profit year since 2014 with last year’s numbers. According to market analysis firm FnGuide, Samsung Heavy Industries is projected to log annual sales and operating profits of 7.86 trillion won and 226.8 billion won from 2023, respectively.

The company’s regulatory filing showed that it has accumulated sales and operating profits of 5.58 trillion won and 154.3 billion won, respectively, as of last year’s third quarter earnings results. Although the shipbuilder fell short of meeting last year’s annual goal of $9.5 billion in orders, its yearlong orders accounted for $8.3 billion.

The reduction in the burden of fixed costs due to increased sales and the improvement in profitability based on securing more orders for LNG ships enabled Samsung Heavy Industries’ turnaround.

According to global maritime and shipping analyzer Clarksons Research, the average price of a 174,000-cubic-meter LNG carrier reached $265 million as of December last year, up 6.9 percent from the same month in 2022.

The International Maritime Organization’s revised goal for cutting 100 percent of carbon emissions by 2050, drastically up from the previous target of 50 percent, will likely expand orders for eco-friendly ships such as LNG carriers and methanol-fueled ships.

After the company posted operating profits of 183 billion won in 2014, it went into the red and remained on the losing side for eight years between 2015 and 2022. The accumulated operating loss amounted to over 5 trillion won during that period.

Samsung Heavy Industries will officially announce the fourth quarter earnings on Wednesday.

By Kan Hyeong-woo (hwkan@heraldcorp.com)