Seoul: Hanwha Systems Co., the defense solutions arm of Hanwha Group, announced on Monday that it has swung to a net loss in the first quarter, attributing this downturn to significant equity losses connected to its U.S. shipyard investment.
According to Yonhap News Agency, the company reported a net loss of 95.75 billion won (US$65 million) for the three months ended March, a stark contrast to the net profit of 24.36 billion won recorded during the same period last year. The primary factor for this decline was the increased equity losses from Hanwha Philly Shipyard in Philadelphia. These losses were further intensified by severe snowfall in the northeastern United States during January and February, as noted by a company official.
Hanwha Systems currently holds a 60 percent stake in the U.S. shipyard, with the remaining 40 percent owned by its affiliate, Hanwha Ocean Co. The acquisition of the shipyard in 2024 for 140 billion won was part of Hanwha Group's strategy to penetrate the U.S. shipbuilding market, aiming for future contracts from the U.S. Navy. This acquisition marked the first instance of a South Korean shipbuilder purchasing a U.S. shipyard and is a significant component of a Seoul-backed initiative known as "Make American Shipbuilding Great Again" (MASGA). However, costs related to the acquisition have continued to impact the company's earnings.
Despite the net loss, Hanwha Systems experienced a 1.9 percent increase in operating profit, reaching 34.28 billion won in the first quarter, up from 33.63 billion won a year earlier. Additionally, sales saw an increase of 16.9 percent, climbing to 807.09 billion won from 690.1 billion won. The company attributed this revenue growth to the export of multifunction radars for the Cheongung-II missile system to countries like the United Arab Emirates and Saudi Arabia.
Looking forward, the company anticipates that the losses at the Philadelphia shipyard will decrease significantly this year, aided by the planned deliveries of vessels, as stated by a company official.