Samsung Heavy Industries March 2011
Contents Company Overview Global Markets Future Strategy Stena Drillmax (219m 42m 19)
HEAVY INDUSTRIES Company Overview Business Highlights Order & Backlog Risk Management Financial Results Construction Business LNG Carrier (302m 50m 27m) & LNG FPSO(336m 50m 32m) 3
Business Highlights Revenue of 2010 Construction 8% Commercial Vessels 41% Backlog as of Feb 28, 2011 Commercial Vessels 52% Offshore 51% Offshore Facilities 48% (KRWt) (US$b) Construction division excluded 4 Revenue & OP margin (KRWt) (%) 20 15 10 5 0 Earnings per share and dividend (KRW) 5000 4000 3000 2000 1000 0 6.4 250 675 Offshore Ship Construction OP margin 1.6 8.5 Earnings per share 500 500 500 500 2178 4.7 10.6 7.1 6.1 2899 2900 Dividend 3848 2006 2007 2008 2009 2010 7.6 13.1 13.1 2006 2007 2008 2009 2010 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 (KRW) 600 400 200 -
Order & Backlog Order backlog Tankers 19% Containerships Drilling 27% LNG Carriers 5% Rigs 31% Ferries 1% Customer by region Production Facilities 17% (US$b) As of Feb 28, 2011 New orders 13.5 21.2 15.3 Production Rigs Ferries LNGCs Container Tankers 1.4 2006 2007 2008 2009 2010 (US$b) 9.7 Asia 10% Middle East & Africa 11% America 22% (Brazil 11%) Europe 57% (Greece 14%) (Norway 14%) Foreign exchange rate Jan 1, `08 Jan 3, `11 Difference CHY 7.3041 6.5910 10% JPY 111.93 81.88 27% KRW 938.2 1,138.9 21% Source: Market data 5
Risk Management SHI focuses on minimizing profit volatility Building Event Contract Steel cutting Keel laying Launching Delivery Time Gap (months) 26 4.5 2.5 3.0 Currency Receivables Payables Raw Materials Main Engine Machinery Steel Plate Bulk Parts : Hedging, order : Execution, delivery Foreign currency exposure has been fully covered through forward transactions since 2002 Main machinery including engine are ordered within 6 months of contract signing, while SHI has a buffer in bidding price against unexpected price hike for raw material like steel plate 6
Financial Results Income statement (KRWb) 2009 2010 1Q 2Q 3Q 4Q Total Sales 13,095 3,330 3,035 3,146 3,542 13,053 Shipbuilding 12,261 3,144 2,790 2,903 3,236 12,073 Construction 834 186 245 243 306 980 Operating Profit (Margin) 794 (6.1%) 216 (6.5%) 260 (8.6%) 264 (8.4%) 257 (7.3%) 997 (7.6%) Pre-tax income 855 256 281 358 254 1,149 Non-OP income 6,222 1,795 940 384 654 3,773 Non-OP expense 6,161 1,755 919 290 657 3,621 Net income 670 200 230 259 199 888 7
Financial Results Balance sheet (KRWb) 2008 2009(A) 2010(B) B-A Total Assets 26,084 20,188 17,995-2,193 Cash & equiv. 2,490 1,085 1,228 143 Account receivable 1,999 3,814 5,259 1,445 Advance payments 2,880 2,405 1,663-742 Hedge related 12,796 6,916 3,370-3,546 Inventories 778 579 542-37 Total Liabilities 23,760 17,347 14,179-3,168 Advance receipt Debts Hedge related 8,632 158 12,518 5,658 2,780 6,817 4,966 2,487 3,580-692 -293-3,237 Total Equity 2,324 2,841 3,816 975 Paid in capital 1,154 1,154 1,154 - Treasury shares -674-671 -662 9 Total Liab. & Eqty 26,084 20,188 17,995-2,193 8
Construction Business Business overview Main projects Revenue and profit (KRWb) 1,000 Revenue 800 Operating Profit 10% 8% Road Apartment 600 6% 400 200 4% 2% Incineration plant Office building - 2006 2007 2008 2009 2010 0% Order backlog Civil & Plant 33% Building & Housing 67% (KRWt,%) Townhouse Hotel As of Dec 31, 2010 9
HEAVY INDUSTRIES Global Markets Shipbuilding Market Major Market Situations Drilling Rig Market Production Facility Market LNG FPSO Market Major products of SHI : Containership, LNG Carrier, Drillship and FPSO (clockwise from upper left) 10
Shipbuilding Market Global new orders (Mn. GT.) 180 160 140 120 LNG Carrier Containership Tanker Bulker Other Sea Trade World GDP AVG : 73 116 177 AVG : 135 111 (YoY %) 18.0% 15.0% 12.0% 100 AVG : 36 9.0% 80 77 74 69 71 6.0% 60 40 20 46 30 31 35 30 3.0% 0.0% - '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10-3.0% Global economic recovery and rapid growth of Chinese economy lead shipbuilding order Regulation changes and need for substitution prompt a rush of new orders Replacement orders for single-hull tankers and old bulk carriers enlarged total orders in 2006 to 2008 11
Major Market Situations Freight index M/S by country and vessel type 300 11,612 WS B D I CCFI 1,215 1,054 1,621 50.5 Bulkers 8% 24% 19% 49% Tankers 8% 12% 29% 51% 07/1/5 08/1/5 09/1/5 10/1/5 11/1/5 Fleet vs backlog Fleet (A) Old Fleet Backlog (B) (Mn. G/T) B/A(Growth Average) Bulk Carrier 290 68 150 52% (5%) Tanker 240 37 66 28% (5%) Korea China Japan Others Container Ships LNG Carriers 4% 8% 11% 5% 5% 20% 68% 79% Containership 150 9 43 29% (9%) Source: Clarkson, as of Dec 31, 2010 Source: Clarkson, as of Dec 31, 2010 12
Major Market Situations : Containership Fuel & charter cost 1,600 1,200 800 400 0 Jan. '07 Jul. '07 Fleet laid up 1600 1200 800 400 150(1%) 1,406 Jan. '08 720 Jul. '08 233 Jan. '09 1240(10%) Jul. '09 HRCI Bunker-C 0-1,500 Oct. '08 Feb. '09 Jun. '09 Dec. '09 Oct. '10 Source: Clarkson, SHI 329 Jan. '10 1520(12%) ($/Ton.) 466 699 Oct. '10 800 600 400 200 0 (th. TEU) 280(2%) 13 Cost comparison by speed Normal Slow steam Speed(knots) 23 18.5 Voyage Days Charter cost(a) Fuel consumption(ton/day) Fuel cost(b) 56 1.7 200 3.9 70 2.1 105 2.8 Total cost (A+B) 5.6 4.9(-12%) Source: NYK, 10.4 Demand forecast (K TEU) 2,000 1,500 1,000 500 - -500-1,000 (Mn. US$) CO2(th. Ton.) 24.4 17.4(-29%) '07 '08 '09 '10 '11 '12 supply demand trade growth (%) 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0%
Drilling Rig Market Rig Types Order History & M/S by country Shallow Water Jack-ups Jack-ups 21% Drillships Semi-sub 40% 39% 75.5US$b Orders Drillship Semi Sub Jack-Up Semi-submersible Korea Singapore China Others (47%) (28%) (11%) (14%) Deep Water Drillship 2005~2009.3, Floating rig, value based (source : RS Platou, SHI) Deep water rig orders (Unit) 30 20 10 0 10 2 19 12 10 14 10 19 3 1 2 4 Semi Drillship '05 '06 '07 '08 '09 '10 '11~15(E) 2 10 14
Production Facility Market Facility Types Order History & M/S by country Shallow Water Fixed Platform Barge 5% TLP 15% Semi 17% FPSO 62% 111Unit Order Barge Semi TLP FPSO Deep Water F.P.S.O F.P.U Korea Singapore China Japan Others (46%) (16%) (14%) (3%) (22%) 1996~2008.8, Floating Facilities, number based (Source : IMA, SHI) Production facility orders (Unit) 16 12 8 4 0 SPAR SEMI TLP FPSO 1 1 2 1 1 2 3 3 3 2 3 3 3 3 4 5 1 '05 '06 '07 '08 '09 '10 '11~15(E) 15 2 2 2 1 2 3
LNG FPSO Market LNG FPSO Strong points of LNG FPSO Pre-treatment Liquefaction Mobility Less Capex Reliability Natural gas LNG FPSO LNG FPSO target market LNG FPSO order forecast Target Field Niche field Small field (10~600mt) Conventional field Large field (600~6000mt) (No. of projects) 4 3 2 4 Large Medium 2~3 1~2 Capacity ~2.5 mtpa 2.5~6.0 mtpa Customer FPSO operators Major oil producers 1 0 1 1 1 '08 '09 '10 '11~15(E) 16 Source: SHI
HEAVY INDUSTRIES Future Strategy Technological Leadership New Construction Method Wind Turbine Business Globalization Strategy Sakhalin fixed platform built by SHI 17
Technological Leadership Icebreaking Tanker Ice Drillship Ice Container LNG FPSO LNG FSRU 16,000 teu Container Growing environmental awareness creating eco-friendly product markets Innovative technology and shrinking oil reserves are triggering new Arctic oil production era Increasing demand for new products provides SHI with new business opportunities 18
New Construction Methods Maximizing dock capability Production process (Block size) No. of blocks Dock time Old method (300 tons) 100 blocks 60 days Mega block ('01) (3,000 tons) 10 blocks 45 days Mega block assembly Floating crane lift Giga block ('07) (5,000 tons) 6 blocks 30 days Tera block ('08) (10,000 tons) 3 blocks 25 days (115,000 톤유조선기준 ) Laying on F. dock Launching Crude oil tanker: 115K Combining floating docks and cranes significantly reduces dock time and maximizes efficiency New construction methods are the best way to satisfy growing market demand 19
Wind Turbine Business Business opportunity Economy of wind turbine 50 40 30 20 Global US Japan Korea (USC/kWh) 10 0 Wind Nuclear Thermal Solar Source: Asia Pacific Energy Research Center Business plan Wind turbine structure Blade Drive train Nacelle Gear box Generator Tower Demand forecast (GW) 80 60 40 20 0 28.1 Others China EU US US$ 34.2 40.3 55.0 '10 '11 '12 '15 '20 (US$b) 93.2 100 Source: Emerging Energy Research 80 60 40 20 0 SHI s potentials Shipbuilding & Offshore Digital control system Research institute - Drive train designs - Quality management system - Wind turbine controller - Data acquisition - Aerodynamics & blade design - Noise & Vibration reduction 20
Globalization Strategy Global base Shipyard Overseas subsidiary Branch office London Oslo Moscow Houston Houston Athens Dubai India Rongcheng Ningbo Koje Shipyard Tokyo Brazil China block factory Offshore engineering center Shipyard joint venture Ningbo (Start :1997) - 240,000 tons in 2008-250,000 tons in 2010 Houston - Production facility engineering design Malaysia Singapore Rongcheng (Start: 2007) - 56,000 tons in 2008-300,000 tons in 2010 India - Production facility basic design Brazil (Atlantico Shipyard) - Assets US$780m, Capital US$220m (SHI:10%) - Suezmax, VLCC, Semi Rig Hull Global production and engineering bases enable SHI to meet ship buyers demands 21
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