IR Presentation October 2016

Revenue & Operating Profit Quarterly Earnings 8.7 · Voluntary Resignation compensation of KRW 3.0 Annual Earnings (past five years) - 3 - 0.0 1.0...

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IR Presentation October 2016

CONTENTS

Ⅰ. Financial Highlights

Ⅱ. New order & Backlog

Ⅲ. Products & Market Situation

CONTENTS

Ⅰ. Financial Highlights

Ⅱ. New order & Backlog

Ⅲ. Products & Market Situation

Revenue & Operating Profit Annual Earnings

Quarterly Earnings

(past five years)

□ Revenue: KRW 0.2t increased vs. 1Q 2016

Revenue(Shipbuilding&Offshore) Revenue(Others)

(KRWt) 20.0

8.7

15.0

13.4

10.0

□ Operating loss: KRW 284b - One-off loss of KRW 364b

9.0

8.3

14.5

- Increased number of working days(2) due to seasonal reasons

(%)

OP margin

· Voluntary Resignation compensation of KRW -211b

8.0

14.8

· Semi-Rig provisional amount of KRW -195b

7.0

12.9 6.2

· Offshore project one-off gain of KRW +42b - Operating income exclusive of one-off items is about KRW 80b(2.9%)

6.0

9.7

10.0

Recent 5 Quarterly Results

5.0

2015

4.0

5.0

3Q

1,439

2,436

3,229

2,530

2,721

Operating Profit (OP Margin)

-1,548 (-)

-10 (-)

30 (0.9%)

6 (0.2%)

-284 (-)

Income before tax

-1,498

-34

37

5

-216

Net Profit

-1,155

-25

-43

16

-212

Revenue 2.0 1.0

-

0.0 2011

2012

2013

2014

2015

-3-

2016

2Q

3.0

1.4

(KRWb)

4Q

1Q

2Q

Financial Summary Consolidated Statements of Income 연결 손익계산서 (KRWb)

2011

Revenue Operating Profit (OP Margin) Income before Tax Net Profit

2012

2013

2014

13,392 14,490 14,835 12,879 1,160

1,206

914

183

1Q

2Q

3Q

4Q

2,610

1,439

2,436

3,229

26 -1,548

(8.7%) (8.3%) (6.2%) (1.4%) (1.0%)

(-)

2015

9,714

1Q

2Q

2016

2,530

2,721

5,251

6 30 -1,502 ( - ) (0.9%) ( - ) (0.2%)

-284

-278

(-)

(-)

-10

1,150

1,045

819

190

33 -1,498

-34

37 -1,462

5

-216

-211

851

796

632

147

11 -1,155

-25

-43 -1,212

16

-212

-196

-4-

Financial Summary Consolidated Statements of Financial Position 연결 대차대조표 2011 Total Assets Cash & Cash Equivalent Inventories Property Plant and Equipment Accounts Receivable Advanced Payments FX Hedge Related Asset Other Total Liabilities Advanced Receipts Interest Bearing Debt Accounts Payable FX Hedge Related Liability Others Total Equity Paid in Capital Treasury Stock Retained Earnings Others Debt/Equity Ratio

증감 내용

2012

2013

2014

(KRWb) 2015

June 2016

16,414 1,289 540 5,408 4,078 1,675 2,592 832 11,770 5,602 1,784 830 2,452 1,102 4,644 1,155 -659 3,610 538

16,635 1,164 699 5,278 5,091 1,501 2,064 838 11,352 3,967 3,193 1,436 1,458 1,298 5,283 1,155 -657 4,299 486

17,427 1,140 842 5,254 5,935 1,354 2,035 867 11,581 3,885 2,937 1,622 1,725 1,412 5,846 1,155 -656 4,841 506

17,122 893 1,169 5,273 6,400 1,204 1,113 1,070 11,549 3,799 3,827 1,495 1,093 1,335 5,573 1,155 -970 4,872 516

17,302 2,137 1,449 5,583 4,710 895 1,225 1,303 13,036 3,928 5,033 1,414 1,313 1,348 4,266 1,155 -970 3,594 487

17,589 1,826 1,372 6,567 5,156 737 756 1,175 12,787 3,054 6,014 1,306 795 1,618 4,802 1,155 -970 3,422 1,195

253%

215%

198%

207%

306%

245%

-5-

Risk Management Improvement on risk management before/after the contract signing Pre-contract ITT issue * Invitation to tender

Risk assessment before bid participation

At execution +3 months of contract

Intensive risk analysis & mitigation planning

 Prospect Selection Committee (ITT review incl.)

Risk Workshop

 Cost Review Committee (Quantity review incl.)

 Continuous risk verification & assessment  Specific action plans set-up

 Risk Review Committee  Contract terms Review Committee

KPI management

 Bid Review Committee

Bidding  only for risk hedging available projects

Regular Process

 Factors to drive cost increase and construction delay  Regular KPI check and feedback

Lessons Learned System

Award winning

 To prevent repetitive errors, lessons learned and improvements we’re making for current projects are systematically recorded and applied to future projects

Contract Signing

-6-

Risk Hedging Policy SHI Focuses on minimizing profit volatility Building Event Time Gap (months)

Contract

Steel Cutting 12

Keel Laying 5

Launching 3

Delivery 10

Currency Receivable Payable Raw Material Main Engine Machinery

Steel Plate Bulk Part : Hedging, Order

: Execution, Delivery



Foreign currency exposure is fully covered through forward transaction at the stage of shipbuilding contract



Main engine and machinery are ordered within 1~2 months after contract signing

-7-

CONTENTS

Ⅰ. Financial Highlights

Ⅱ. New order & Backlog

Ⅲ. Products & Market Situation

New Order September 2016

Trend

□ New Orders as of September 30, 2016 - Two 180K m3 LNG vessels were ordered from our client in Europe. One became effective in September 2016, and the other one is expected to be effective by December 2016

(USDb) 16

《 Market Demand 》 ① Commercial Vessel

13.3

14

- With weak Chinese market appetite and momentum, global over supply concerns resulted in extremely limited

12

number of demand for commercial vessels 10

9.6

∙ For the eight-month period ended August 31, 2016, the number of new orders in the global market was

8

7.3

totaled at 296 units (22.3m DWT), 70% down vs. August 2015 ∙ There was only 22 new orders in the global market

5.3

6

subjected to SHI’s participation such as LNG carriers, large-sized containerships and crude oil tankers

4

② Offshore Facilities 2

- As low oil price level continues since 2Q 2014, development of offshore project became unfeasible

0.2

0 2012

2013

2014

2015

due to project economy concern

2016.Sep

-9-

Order Backlog September 2016

Trend

Others 2%

Containership 9%

(USDb)

LNG Carrier 12%

45 40

Production

37.2

37.5 34.8

35

Facility

35.4

$28.2 billion (94 Units)

9%

47% Drilling Rig

28.2

30

Tanker

21% 25 20

Unit Containership LNG Carrier Tanker Drilling Rig Production Facility Others Total

15 10 5 0

2012

2013

2014

2015

2016.Sep

- 10 -

15 17 37 10 9 6 94

USDb 2.3 3.5 2.4 5.9 13.4 0.7 28.2

CONTENTS

Ⅰ. Financial Highlights

Ⅱ. New order & Backlog

Ⅲ. Products & Market Situation

Containership New orders expected to gradually increase after 2H 2016 - After heavy orders during 2015, we expect to start having new orders in the second half of 2016 as new form of alliance group finally be established in 2H 2016

Global order trend & SHI market share (unit) 140

Global Order (Over 10kTEU)

SHI

22%

120

M/S

Supply & Demand Balance (,000TEU) 1,600

(M/S) 25%

1,400

120

Delivery

9% 1,265

6%

800

5%

62 8%

7%

986

15%

51

8% Trade growth to be stable above 6%

1,000

60

10%

1,200

100 80

Trade Growth

1,340 8.1%

20%

4.0%

600

10%

4%

3.7%

3% 400

40

2%

5% 20

Fleet Growth

11

10

200

10

0

0.9% 0

0% 2012 '12

(Source: SHI)

2013'13

2014'14

183

0% '16(e) 2016(e)

2015'15

- 12 -

1%

'17(e) 2017(e)

'18(e) 2018(e)

'19(e) 2019(e)

LNG Carrier Short term demand is weak, but long term outlook is solid due to stable LNG trade growth(CAGR 5%) and longer distances with US exports Global order trend & SHI market share Global Order

(unit) 70

SHI

M/S

Long term outlook of LNG trading & Fleets 2014 trading : approx 240mtpa

(M/S) 40%

36%

35%

~2030 trading(e) : approx 500mtpa Fleet outlook : approx 900 ships (= 30 ships to be ordered a year in avg )

Current fleet : approx 430 ships (1.8ships/1mtpa)

64 60

CAGR 5%

30%

50 40

< World LNG trading outlook>

25%

39

20%

32 30

27 15% 13%

20

11%

14

10%

8% 10

4

5

= approximately 120 vessels needed

5% 3

0

0% 2012 '12

(Source: SHI)

'13 2013

'14 2014

2014 main routes

'15 2015

- 13 -

New supply ~2030

(Source: GasLog, BP, Ernst & Young, Wood Mackenzie Jan 2015 )

Drillship As downturn market condition continues, limited number of demand for high specification drillship can be expected. Global order trend & SHI market share Global Order

(unit) 40 35

SHI

M/S

Next generation: 20K BOP drillship  New demand for 20K BOP drillship is expected

(M/S) 60%

- For safe and efficient operation in high-pressure

35

and high-temperature deep water reservoirs

50%

50%

30 42%

• BP-Maersk “Project 20K”

40%

25

Jointly developing next generation drillship

20

using 20K BOP for Gulf of Mexico since

30%

year 2013

26% 15 10

12

20%

9 5

5

10%

4 2

0

0

0% '12 '13 '14 '15 2014 2013 2012 2015 * Drillship orders for the local content in Brazil included (15 units in 2012 )

(Source: SHI)

- 14 -

Production Facility Seeking both growth and profitability in offshore EPC market through enhancement of EPC execution capability with ongoing projects What we do for strengthening competitiveness

Key projects under construction



Lessons Learned Program - Accumulating and systemizing knowledge learned from current projects to execute following better



Ichthys CPF(Gas), Austrailia

Reinforcement of engineering capacity - New R&D center established only for FEED, FEED verification, detailed design etc. - Recruiting experienced engineers and project managers



Organizational improvement - Risk management team and offshore package procurement team established

Egina FPSO(Oil), Nigeria - 15 -

FLNG SHI’s new growth engine - Market to expand due to its cost benefit and environmental advantage Concept & Advantage

FLNG projects under consideration

Liquefaction

 3 Projects will be complete during year '16~'18  1 Project is under review process

Pretreatment

Number

Natural Gas  Production, treatment, liquefaction and offloading of natural gas to be carried out on a vessel - No need for extensive pipe lines and onshore processing facilities  Less CAPEX required

Projects

Under construction

3

Prelude(Shell) Kanowit, Rotan (Petronas)

Active

1

Mozambique(ENI)

Potential

34

Total

38

Browse, Scarborough, Sunrise, etc.

(Source: Clarkson World Offshore Register )

- 16 -

Appendix- Global Network Global production and engineering bases enable SHI to meet various needs of customers Shipyard

Block Factory

Engineering Center

Branch Office

Oslo London

Geoje Shipyard

Rongcheng

Athens

Tokyo Dubai

Lagos

Deli

Ningbo

Houston Houston

Kuala Lumpur Singapore Rio De Janeiro

Block Factories in China (2)

Ningbo (Since 1997) , Rongcheng (Since 2007)

Offshore Engineering Centers (2)

Houston [ASOG (J/V with AMEC)], Deli (Noida)

Branch Office (10)

London, Oslo, Athens, Lagos, Dubai, Kuala Lumpur, Singapore, Tokyo, Huston, Rio De Janeiro - 17 -

Appendix- Shipyard View Floating Dock 4

Floating Dock 3

SHI Focuses on minimizing profit volatility Floating Dock 2

ShinHanne Factory

Floating Dock 5

Dry Dock No.2 Floating Dock 1

Offshore Facilities Dry Dock No. 1

Dry Dock No.3

Site : 4.0million ㎡ Quay Wall Length : 7.9Km (24 vessels) 3 Floating Cranes : 3,000 / 3,600 / 8,000ton

Main Building

8 Docks (3 Dry Docks & 5 Floating Docks) ▪ No. 1 : 283m × 46m ▪ NO. 2 : 390m × 65m ▪ No. 3 : 640m × 98m ▪ G1 : 270m × 52m ▪ G2 : 400m × 55m ▪ G3 : 400m × 70m ▪ G4 : 420m × 70m ▪ G5 : 157m × 131m (only for Offshore)

- 18 -

Disclaimer

This presentation has been prepared by Samsung Heavy Industries Co., Ltd. and contains forward-looking statements that are subject to risks, uncertainties, and assumptions. The presentation is solely for your information, subject to change without notice, and makes no representation or warranty, expressed or implied and no reliability should be placed on the accuracy,

fairness, or completeness of the information presented herein. The Company, its affiliates, or representatives accept no liability for any losses arising from any information contained in the presentation. The contents of this presentation may not be reproduced, redistributed or circulated, directly or Indirectly, to any other person or organization, or published, in whole or in part, for any purpose.

- 19 -