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HYUNDAI HEAVY INDUSTRIES AND HYUNDAI MIPO DOCKYARD
HYUNDAI HEAVY INDUSTRIES
Hyundai Heavy Industries (HHI) is the world's largest shipbuilder accounting for more than 13% market share of the global shipbuilding market, which exceeds Daewoo Heavy Industries and Samsung Heavy by 1.5 x. HHI is diversified into various businesses lines such as shipbuilding (accounting for 56% of the company's sales in 1999), Engineering and Machinery, Industrial plant Offshore and Engineering.
The type of vessels built by Hyundai shipyard cover the range from conventional bulk carriers, OBO carriers and chemical carriers to pure car carriers, ro-ro ships, LNG/LPG carriers, refrigerated cargo ships, passengers ship s and naval and special vessels.
According to financial statements from 1997 to June 2000, HHI has always been profitable during the investigation period, although facing a high level of indebtedness. However the company has significantly improved its financial situation and particularly its debt-equity ratio thanks to a decrease in working capital, capacity of reimbursement (generating cash), capital increase together with sale of assets.
In particular, in accordance with the CSIP for the Hyundai Group, HHI reduced its debt-to-equity ratio from 239% as of the end of 1998 to 111% as of the end of 1999. Such debt structure improvement has been achieved mainly through the following measures:
-asset disposal: won 1,560 billion including disposal of real estate (office building in Seoul)
-IPO and Rights offering: won 1,010 billion; and
-net profit in 1999: won 322.2 billion.
The following tables illustrate the profitability of HHI, its ability to generate cash as well as the improvement of its financial structure:
| FY end (in billion won) |
2000.06 |
1999.12 |
1998.12 |
1997.12 |
| Sales |
3,270.1 |
6,327.3 |
6,959.7 |
5,889.1 |
| Gross income |
725.3 |
1,191.9 |
1,559.1 |
1,131.9 |
| Operating income |
488.4 |
666.4 |
1,018.5 |
662.5 |
| Non-operating income |
94.1 |
586.0 |
918.1 |
687.4 |
| Non operating expenses |
518.4 |
788.3 |
1,758.8 |
1,129.2 |
| Ordinary income |
64.0 |
464.2 |
177.8 |
220.8 |
| Extraordinary items |
0 |
0 |
0 |
27.8 |
| Net income |
44.4 |
322.8 |
110.9 |
207.5 |
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| FY end |
Ordinary
Income %sales |
EBITDA/Int
expenses |
CF/total
borrow. |
Debt/Equity
ratio |
| 2000.06 |
2.0 |
3.3 |
30.0 |
132.7 |
| 1999.12 |
7.3 |
2.1 |
12.9 |
111.0 |
| 1998.12 |
2.6 |
1.9 |
16.5 |
238.6 |
| 1997.12 |
3.7 |
1.8 |
16.8 |
346.4 |
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The investigation confirmed that the company has not received highly preferential debt and interest neither rescheduling nor debt write-offs. In fact it appears on the contrary that HHI is supporting other ailing Hyundai affiliates through direct investments or cross-debts guarantees (such as Hyundai Electronics). Since 1999 HHI also provided a debt guarantee of won 1,183 million to Samho (See Samho fiche of Annex) following a trusteeship agreement under which HHI provides management services. In addition HHI holds a 27.7% stake in Hyundai Mipo.
HYUNDAI MIPO
Hyundai Mipo is the world's largest ship-repair yard Since 1995, Hyundai Mipo has extended its activities to building new ships and this activity represented 62% of 1999 total sales. Over the last 5 years it has constructed a wide array of vessels such as Product tankers, Bulk carriers. Multi-Purpose-Carriers, Drillships, Cable layers, Pipe layers, FPSO.
Hyundai Mipo as illustrated by the tables below has always been profitable since 1997 and its financial structure has improved significantly with a debt to equity ratio decreasing from 397% in 1997 to 87.8% in 1999. The improvement of the financial structure is mainly due to repayment of debt with proceeds from an issue of new shares with purchase and disposition of invested assets.
| FY end (in bil won) |
1999.12 |
1998.12 |
1997.12 |
| Sales |
623.3 |
617.6 |
360.9 |
| Gross income |
75.5 |
94.7 |
37.6 |
| Operating income |
58.5 |
69.4 |
29.2 |
| Non-operating income |
97.8 |
72.6 |
34.6 |
| Non operating expenses |
93.9 |
106.3 |
49.3 |
| Ordinary income |
62.3 |
35.7 |
14.6 |
| Extraordinary items |
0.0 |
-0.1 |
-0.5 |
| Net income |
43.3 |
21.6 |
12.1 |
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| FY end |
Ordinary
Income %sales |
EBITDA/Int
expenses |
CF/total
borrow. |
Debt/Equity
ratio |
| 1999.12 |
10.0 |
1.8 |
15.9 |
87.8 |
| 1998.12 |
5.8 |
1.6 |
23.4 |
194.6 |
| 1997.12 |
4.0 |
2.9 |
25.7 |
397.4 |
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Both the investigation and audited accounts provided from 1997 to 1999 confirmed that the company has not received highly preferential debt and interest rescheduling nor debt write-offs.
As a result, the investigation concludes that nor HHI neither Hyundai Mipo have received subsidies through debt or interest relief.
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