Hanwha Corporation’s Q3 operating profit falls 20% year on year amid construction weakness and higher explosives costs

[Financial News] Hanwha Corporation’s profitability fell by a double-digit percentage year on year in the third quarter of this year, as its construction business weakened and industrial explosives costs rose. Revenue declined as a series of major construction projects were completed while new projects were delayed, and higher raw-material prices eroded profitability in the explosives business.
Hanwha Corporation disclosed on the 4th that it recorded revenue of 842 billion won and operating profit of 52.1 billion won on a standalone basis in the third quarter of this year. These figures were down 21.8% and 19.8%, respectively, from the same period a year earlier. Compared with the previous quarter, revenue fell 15.9% and operating profit declined 54.0%. The operating margin was 6.2%, up 0.2 percentage points from a year earlier.
Hanwha Corporation is both the holding company of Hanwha Group and an operating company that runs businesses directly. It holds stakes in key affiliates, including Hanwha Aerospace, Hanwha Solutions Corporation and Hanwha Life, while operating its own construction and global businesses. The Construction Division carries out large-scale mixed-use development, housing and infrastructure projects, while the Global Division handles the manufacture and sale of industrial explosives, explosives materials such as nitric acid and ammonium nitrate, and chemical products, as well as the trading of petrochemical products.
The weakness in this latest performance was particularly pronounced in the Construction Division. Its revenue fell 43% year on year to 403.3 billion won, while operating profit plunged 81% to 3.5 billion won. Its operating margin also declined from 2.7% in the third quarter of last year to 0.9% this year. The decline is attributed to the completion of major construction and development projects, as well as delays in starting new projects and resuming existing ones.
The Construction Division is seeking to recover its performance by expanding new orders. It had secured 2.3 trillion won in new orders through the third quarter of this year, against an annual target of 4.3 trillion won. As of the end of September, its order backlog stood at approximately 15.6 trillion won, excluding the Bismayah New City project in Iraq. In July, it signed an implementation agreement for the Jamsil Sports and MICE Complex Development Project, with a contract value of approximately 1.5 trillion won, and is pursuing construction starts next year for that project and the Suseo Station Transfer Center Development Project.
The Global Division, which handles explosives and chemical products, also struggled to secure profitability. Revenue rose 15% year on year to 360.5 billion won, but operating profit fell 92%, from 13.8 billion won to 1.1 billion won. Revenue grew thanks to the exchange-rate effect on exports, but rising ammonia prices pushed up the manufacturing costs of key products such as nitric acid, ammonium nitrate and explosives. Uncertainty over demand for industrial explosives also persists amid a delayed recovery in the construction market.
Hanwha Corporation plans to improve the profitability of its own businesses while accelerating efforts to stabilize its financial structure. By 2030, the company plans to invest a total of 700 billion won, including 200 billion won in research and development (R&D), 200 billion won in equity investments and 300 billion won in facilities.
[email protected] Jung Won-il Reporter