Hanwha improves fundamentals in 3 years under Vice Chairman Kim Dong-kwan

Hanwha Group Vice Chairman Kim Dong-kwan, right, and President Lee Jae Myung pay respect to Korea's national flag during the naming ceremony of the TS State of Maine at Hanwha Philly Shipyard in Philadelphia, Aug. 26 (local time). Yonhap

Hanwha Group Vice Chairman Kim Dong-kwan has marked his third year in the post with significant improvements in the business fundamentals of the heavy-industry-oriented conglomerate under his leadership.

Kim, the eldest son of Hanwha Group Chairman Kim Seung-youn, has been at the forefront of the group’s management since being appointed vice chairman on Aug. 29, 2022.

One of the most noteworthy changes under his leadership is the rapid growth of the group’s corporate value.

As of August this year, the combined market capitalization of Hanwha’s 13 listed companies stood at 120.7 trillion won ($87 billion), up 177.4 percent from 43.5 trillion won at the end of last year. During the same period, the benchmark KOSPI grew 30.6 percent, meaning the market valuation on Hanwha Group has far outpaced the average.

Hanwha Group Chairman Kim Seung-youn, center right, and Vice Chairman Kim Dong-kwan, center left, pose with Hanwha Aerospace employees at the company's plant in Changwon, South Gyeongsang Province, May 20, 2024. Courtesy of Hanwha Group

Playing a pivotal role are the group’s aggressive and timely investments in industries with strong momentum, especially shipbuilding and defense.

In 2021, before Kim’s promotion to vice chairman, Hanwha’s defense and shipbuilding units posted a combined 6.76 trillion won in sales, accounting for about 19 percent of the group’s total revenue. Last year, however, the combined revenue jumped to 21.49 trillion won, raising the share of the two sectors to 39 percent.

In May 2023, Hanwha Group took over Daewoo Shipbuilding & Marine Engineering (DSME) and renamed it to Hanwha Ocean. The company’s sales remained at 4.82 trillion won in 2022, but jumped to 10.76 trillion won last year. Operating profit also reached 210.8 billion won in 2024, improving from 1.64 trillion won of operating loss in 2022.

The turnaround was driven by increased orders for high value-added liquified natural gas carriers and special purpose vessels, which significantly improved profitability. It also created synergy by combining Hanwha’s defense expertise with DSME’s naval capabilities.

Hanwha Ocean became the first Korean shipbuilder to win a U.S. Navy maintenance, repair and overhaul (MRO) contract and has so far signed agreements to service three vessels. Four more ships are reportedly on the shortlist for additional MRO contracts.

Participants applaud during the naming ceremony of the TS State of Maine at Hanwha Philly Shipyard in Philadelphia, Aug. 26 (local time). Yonhap

Another pivotal moment for Hanwha Ocean’s growth is its acquisition of the former Philly Shipyard — now Hanwha Philly Shipyard — in Philadelphia in December last year.

Amid the Donald Trump administration’s effort to revitalize the American shipbuilding industry and Korea’s strategic response of investment pledges, the shipyard is now emerging as the symbol of the Korea-U.S. shipbuilding partnership, and Kim announced last week that the group will invest $5 billion into the shipyard, an amount 50 times larger than the $100 million it spent for the takeover.

“Given the current gap in shipbuilding capacity between the two countries, it seems inevitable for Korean shipbuilders to assist U.S. shipbuilding in the short term,” iM Securities analyst Byun Yong-jin said.

“In the longer run, however, they are expected to be rewarded by winning orders for commercial and naval vessels in the U.S., and it seems quite obvious that Hanwha Ocean, which is now at the forefront of supporting the U.S., is likely to be the biggest beneficiary.”

Hanwha Group Vice Chairman Kim Dong-kwan, center, applauds during the welcoming ceremony of Poland's then-President Andrzej Duda, left, at Hanwha Aerospace's plant in Changwon, South Gyeongsang Province, Oct. 25, 2024. Courtesy of Hanwha Group

Another noteworthy achievement under Kim’s leadership is the merger of Hanwha’s defense units into Hanwha Aerospace.

To consolidate the group’s defense capabilities across land, sea, air and space, which were previously scattered among different units, Hanwha Aerospace merged with Hanwha Precision Machinery’s defense division in August 2022, Hanwha Defense in November 2022, and the defense unit of Hanwha Corp. in April 2023.

This gave Hanwha Group an opportunity to reduce overlapping investments while optimizing resources in research and development, production and marketing. With greater scale and a consolidated product portfolio, Hanwha Aerospace is strengthening its bargaining power in the global defense market.

Hanwha Aerospace's K9 self-propelled howitzer / Courtesy of Hanwha Aerospace

As this strategy coincided with growing defense demand amid global geopolitical uncertainties, Hanwha Aerospace’s operating profit in the second quarter jumped 156.3 percent from a year earlier to a record-high of 864.5 billion won. Its order backlog now reaches 31.7 trillion won.

For Kim, however, challenges remain as the prolonged slump in the petrochemical sector has weighed on Hanwha Solutions and other chemical affiliates.

Hanwha Solutions’ chemical division posted 1.24 trillion won in sales and 46.8 billion won in operating loss in the second quarter of this year. It is also currently in a dispute with DL Chemical over financial aid for their joint venture, Yeochun NCC, a naphtha-cracking center.

Yeochun NCC has posted operating losses for three consecutive years since 2022. To shore up the struggling joint venture, Hanwha Solutions and DL Chemical injected 200 billion won in March through a capital increase, but again faced financial difficulties that prompted both companies to each lend an additional 150 billion won. With the global downturn persisting and oversupply from China continuing, financial instability in that sector is expected to persist.