Hyundai Heavy Industries Holdings Co., the holding company of South Korea’s largest shipbuilder Korea Shipbuilding & Offshore Engineering, posted a nearly 50 percent drop in operating profit in the second quarter year over year on weak oil prices, but managed to return to profit from on quarter on solid earnings of its affiliates thanks to aggressive cost-cutting efforts under COVID-19.

Hyundai Heavy Industries Holdings said in a regulatory filing on Thursday that it raised 104.3 billion won ($87.3 million) in operating profit in the April-June period, falling 48.3 percent from the same period last year but shifting from an operating loss of 487.2 billion won in the previous quarter.

Sales were down 41.3 percent on year and 29.9 percent on quarter to 4 trillion won, while net profit reached 22.2 billion won, plunging 59 percent from the same period a year ago but reversing from a net loss of 360.4 billion won in the previous quarter.

Shares of Hyundai Heavy Industries Holdings were trading 0.42 percent lower at 235,000 won on Friday.

The holding company said its revenue fell on year in the cited quarter due to lower international oil prices and regular maintenance work of Hyundai Oilbank Co.’s facility in Seosan, South Chungcheong Province.

The company managed to swing back to profit on quarter despite challenging business environment mainly on strong performance of affiliates driven by preemptive cost-cutting efforts to fight against the coronavirus-driven economic fallout.

Its key affiliate Hyundai Oilbank, in particular, delivered strong results despite the negative refining margin. It raised 13.2 billion won in consolidated operating profit in the second quarter, becoming the country’s only refiner to report profit in the quarter after successfully reversing from loss in the first quarter. Sales fell 42 percent on quarter to 2.6 trillion won.

Hyundai Oil Bank succeeded in returning to profit on quarter by saving costs significantly after it sharply upped use of cheaper extra-heavy crude oil to produce oil products at its highly advanced facilities. Hyundai Oilbank also ramped up output of more profitable diesel products while minimizing production of aviation gasoline under the COVID-19 crisis.

Another key affiliate Korea Shipbuilding & Offshore Engineering, the country’s biggest shipbuilding group that is also the interim holding company, raised 92.9 billion won in operating profit in the April-June period, up 67.7 percent from the same period a year ago, but down 23.7 percent from the previous quarter. Sales also inched up 0.1 percent to 3.9 trillion won on year but sliding 0.5 percent on quarter.

Its offshore business narrowed loss on quarter after reducing fixed costs following the commencement of large projects. Engine machinery business continued to post profit on the back of cost-saving efforts.

Its shipbuilding business started building more high value-added vessels but saw a slight fall in profit in the second quarter on a quarterly basis due to the stronger Korean won against the U.S. dollar.

Hyundai Heavy Industries, Hyundai Samho Heavy Industries, and Hyundai Mipo Dockyard are units under Korea Shipbuilding & Offshore Engineering.

Shares of Korea Shipbuilding & Offshore Engineering Co. were trading 0.88 percent lower at 90,200 won on Friday.

The holding company also has Hyundai Construction Equipment Co. and Hyundai Electric Co. as affiliates.

By Lee Eun-joo

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