Samsung Heavy Industries Co, the world's second-biggest shipyard, said first-quarter profit climbed 29 percent after building vessels and offshore platforms at higher prices.

Net income increased to 115.8 billion won ($114 million) in the three months ended March 31 from 90.1 billion won a year earlier, the Seoul-based company said in a regulatory filing yesterday. Sales rose 33 percent to 2.42 trillion won.

Ship prices are rising to records for a fifth year as shipbuilders pass on higher steel costs to buyers and as demand for vessels to carry fuel and consumer goods outstrips supply. Yards in South Korea, the world's largest shipbuilding nation, are expanding capacity as their order backlogs stretch into 2012.

"South Korean shipyards have reported earnings that have beaten expectations for the past few quarters as they build more pricier vessels," said Cho In-karp, an analyst at Good Morning Shinhan Securities Co in Seoul. "Earnings growth in the second and third quarters may slow because of higher steel prices, but should fare better from the fourth quarter." He rates the country's shipbuilding industry "overweight".

Samsung Heavy shares gained 2.3 percent to 37,700 won as of 1:51 pm in Seoul. The stock has dropped 6.2 percent this year, compared with a 2.1 percent decline in South Korea's benchmark Kospi index.

Samsung Heavy's first-quarter operating profit, or sales minus cost of goods sold and administrative expenses, more than tripled to a record 223.6 billion won.

Operating profit margin widened to 9.2 percent from 5.5 percent in the previous quarter and 3.5 percent a year earlier. The margin compares with 17.7 percent for bigger rival Hyundai Heavy Industries Co's shipbuilding business and 16.4 percent for its unit Hyundai Mipo Dockyard Co, the world's fourth-largest shipbuilder.

"Samsung Heavy is working on orders it received at record prices and seems to have completed almost all of the low-priced ones received in 2002 and 2003," said Kang Young-il, an analyst at Korea Investment & Securities Co in Seoul. He has a "buy" rating for the stock.

Agencies

(China Daily 05/07/2008 page16)