Hyundai Heavy Industries Co Ltd

KRX:329180

Q3-2025 Earnings Call

[Hee-jun Song, executive]

[Interpreted] Good afternoon. This is Hee-Jun Song from KSOE IR. I'd like to start the Q3 2025 Earnings Presentation. This is going to be our shipbuilding subsidiaries and our key businesses. First of all, I would like to go over the key highlights of the quarter followed by our performance. Then I will discuss market conditions for Shipbuilding and Offshore Plant businesses and move on to the Q&A session.

First of all, currency impact. In Q3, the quarter end FX rate increased by KRW 46 trillion while the average rate decreased by KRW 13 trillion. As a result, the overall FX impact was minimal. For reference, the rate had fallen by KRW 49 trillion in the previous quarter. And second, steel prices. Steel prices stayed flattish with minimal impact on the margin. Despite a bit of losses, steel prices did not impact our margin significantly. So a bit of losses from currency impact and steel prices, but no sizable impact on our margin.

Third, one-off factors. At HHI, approximately KRW 25 billion in additional costs were recognized from legacy offshore plant projects. And recently launched projects are proceeding smoothly and continue to maintain solid profitability. And at HMD, KRW 53 billion of one-off gains for KiwiRail project cancellation settlement and related cost refunds were recognized. And at Samho, around KRW 8.5 billion in exploration costs were incurred due to a transformer fire incident. Next is one-off costs regarding the collective bargaining agreement and merger incentives, including incentives. HHI and HMD recognized KRW 18.6 billion and KRW 7.2 billion, respectively, mostly merger incentives.

Lastly, for the annual breakdown of revenue by shipbuilding subsidiary, you may refer to the IR material. And for the breakdown of revenue by vessel type, first of all, HHI, LNGCs, 49.2%, inching down quarter-over-quarter; and LPGC, 26.4% increasing; and container ships, 15.7% decreasing. Now Samho LNGCs, 38.2%, inching down; container ships, 34.2% decreasing; tankers, 15.1%, increasing significantly; and LPGCs 5.7%, remaining unchanged. Now Mipo, GCs, 52.5%, inching down; LPGCs, 23.3%, increasing slightly. And for other vessels, 13.6% increasing.

Now Page 4, please. I will move on to Page 4 and elaborate more on KSOE's Q3 2025 earnings. But before moving on to the financial results, let me briefly mention one notable point. Q3, as you know, has been the lowest season in terms of sales. And it is normal to record lower sales than the previous quarter. But despite long vacation periods, our sales rather increased quarter-over-quarter, and it is an exceptional case. The sales increased by 2.1% quarter-over-quarter and by 21.4% year-over-year, which is attributable to productivity gains and other factors. Despite a weak dollar and seasonal factors, our revenue increased driven by steadily enhancing productivity, so driving our overall revenue. OP increased by 10.5% quarter-over-quarter and by 164.5% year-over-year, a significant increase. So steady improvement in profitability has been maintained, and I will touch on the nonoperating part later.

Page 5, earnings by business division, and please refer to the table below, and let's turn to Page 6 for further details. Page 6 and sales by key division. First, on the Shipbuilding segment. Despite a weak dollar and fewer working days, revenue is solid, supported by higher vessel prices and improving productivity. So it would have been better if there was no incident at Samho. And next, Offshore. Sales increased 13.1% quarter-over-quarter and 52.8% year-over-year. The Trion FPU has entered its full-scale construction with 39.4% of completion rate, while the Ruya project recorded a 6.3% progress rate. Now Engine sales. Engine sales increased 6.4% quarter-over-quarter, 31% year-over-year, driven by higher delivery volumes and an improved product mix.

Page 7. And here is the breakdown of OP by division. First of all, Shipbuilding. Despite a weak dollar and seasonal factors, OP increased significantly 7.5% quarter-over-quarter, 128.9% year-over-year and recorded a very solid profitability with OPM of 14%. So compared to Q2, we have an increase in OPM. Now Offshore. Offshore slightly turned negative, but excluding one-off factors, the underlying margin remained solid. One-off losses of KRW 25 billion were recognized from a vintage project.

And next, Engine & Machinery. Engine OP increased 20.9% quarter-over-quarter, 137.5% year-over-year. As I mentioned earlier, overall profitability has improved, supported by sales growth and product mix enhancement. And especially the engines ratio, if you look at the ratio, two-stroke engines, 75% and four-stroke engine, 80% showing growth. Now naval vessel, which is not included in this page, sales recorded KRW 373 billion, increasing by 53.7% quarter-over-quarter. Recognition of offshore revenue has increased, and KRW 15.8 billion one-off settlement for two frigates that were delivered in 2023 has been made in this quarter.

OP recorded KRW 51.1 billion, increasing by 90% quarter-over-quarter. As I recall, profit fluctuations may continue to occur depending on the timing of project settlements and the mix. So in the following quarter and after that, we may witness such profit fluctuations.

Now Page 8. Please refer to the operating performance table of consolidated subsidiaries, and I will provide a more detailed explanation on Page 9. First of all, KSOE, on a stand-alone basis, KSOE turned positive, receiving half year dividend payments from its subsidiaries amounting to KRW 299 billion. So once again, turning positive. Supported by higher vessel prices and continued productivity enhancement, HHI's Shipping -- Shipbuilding segment delivered steady sales and margin growth compared to the previous quarter. And as I mentioned earlier, the Engine business also maintained a solid operating performance with significant margin improvement this quarter.

Although there were one-off costs occurring from a vintage project, it is worth noting the current projects are progressing smoothly. So for Offshore, we may expect even better results in Q4. Let's move on to Samho. Despite the fire incident, its annual construction target is under control. So Q3 margin was lower than Q2 due to restoration costs and increasing sales portion of tanks, but we expect Q4 margin to recover and show stable operating performance.

Now Page 10, Mipo. And Mipo's earnings growth is accelerating. So despite fewer working days, Mipo benefited from faster product mix improvement, higher vessel prices and stronger productivity gains compared to other subsidiaries. So quite a noticeable change and improvement, especially recognition of projects awarded after 2024 accelerated from 32% to 51% this quarter. And this contributed to rapid margin growth, thanks to productivity gains. So that was about Mipo.

And next, Hyundai Marine Engine. Despite a seasonal slowdown, the business achieved steady improvement in ASP and productivity, resulting in higher margins compared to peers and other shipbuilding subsidiaries. And also, the company has engaged in continuous cost control activities, resulting in high margin growth. And there were no one-off factors recorded in this quarter. So in Q4, we believe revenue would grow and there will be additional profitability that we're expecting.

Now lastly, HD Hyundai Energy Solutions. Although its operating performance appears to have declined from the previous quarter, excluding the one-off Angola project revenue recognized in Q2, the company has continued to show steady quarterly growth. And although domestic sales slightly declined due to the prolonged autumn rain, exports to the U.S. increased significantly, resulting in solid overall performance. Looking ahead, the easing of tariff issues in the fourth quarter is expected to further support U.S. exports, allowing the company to sustain its strong performance.

Now Page 11, nonoperating income. Nothing special, but due to a KRW 46 increase in the Korean won, U.S. dollar quarter-end FX, we recorded foreign exchange-related gains. And Page 11, financial ratios. All four major subsidiaries maintained a net cash position with a combined net cash balance of approximately KRW 8 trillion, a very solid financial standing. And the cash flow is very good.

So that concludes the presentation of HD Korea Shipbuilding and Offshore Engineering's Q3 2025 earnings. And next, Mr. Yun Seok Lee, Head of Ship Sales division, will provide an update on the global shipbuilding market.

[Woon-seok Lee, executive]

Hello. I am Jun-Yup Lee, Executive VP of Strategy and Marketing at HD KSOE. I'd like to present the performance review for the Shipbuilding division and then share our outlook for the business. Now global new orders totaled 51.2 million GT or 1,185 ships, down more than 45% from 113.4 million GT in the same period last year. And this decline reflects the weaker demand sentiment among shipowners amid U.S. trade policy volatility, environmental regulation uncertainty and a high backlog from 2024 orders. Despite the sluggish orders, HD Group has recorded cumulative orders of USD 6.2 billion at HHI, and USD 4 billion at Samho and USD 2.2 billion at Mipo, and USD 0.2 billion at HHIP as of Q3 2025, totaling USD 12.6 billion. And this represents 84.2% of our annual order target of USD 15 billion, demonstrating steady order momentum and continued progress toward achieving this year's goal despite the weaker global demand.

As of Q3 2025, the cumulative new building orders by vessel type are as follows: Hyundai, 24 container ships, 2 VLGCs, 2 VLECs, 2 VLACs and 4 tankers, including 2 VLCCs, the 34 units of ships, USD 6.2 billion. Now Samho 5 LNGCs, 14 container ships, 8 tankers, so 27 units of ships or USD 4.02 billion. Mipo, 21 containerships, 6 LNG bunkering vessels, 1 PC, 5 MGCs, 33 units of ships, USD 4.02 billion. HHIP, 3 PCs, so USD 0.22 billion. In total, 97 units of ships, USD 12.64 billion.

Despite the overall contraction in demand this year, we have remained firmly on track toward achieving our ambitious annual targets. And leveraging the continued strength in containership orders since last year, we focused on selectively securing high-value, high-margin projects to ensure a stable backlog and sustained profitability. And this performance underscores our solid competitiveness supported by superior technological capabilities and agile market responsiveness.

As of September 2025, the Clarkson Newbuilding Index stood at 185.58, gradually declining from the peak of 189.96 recorded in September 2024. However, the current level remains more than 40% higher than that of early 2021, indicating that prices are still firm. This trend suggests that ample shipyard backlogs have helped mitigate the pace of price drop despite lower demand. And as new order activities have shown signs of recovery entering Q4, newbuilding prices are expected to remain at a high level.

And I'd like to share an update on the current market conditions by vessel type, LNGC. Up to Q3, only 17 large-sized LNGCs were ordered in the market, a sharp decline compared to 74 units in the same period last year. This is largely attributed to a temporary downturn in the LNG freight market driven by increased vessel deliveries, reduced LNG imports from China and a higher share of short-haul trade between the U.S. and Europe, which together have disrupted the overall supply-demand balance. In addition, delays in several major LNG export projects have further weakened newbuilding activity. However, as new LNG development projects resume and replacement demand for outdated LNG carriers begin to emerge, the LNG carrier market is expected to recover swiftly in the coming quarters.

Now container market. Despite uncertainties stemming from U.S. tariff disputes and port fees, the containership market continues to show strong momentum. And this is supported by sustained ton-mile demand due to ongoing disruptions in the Red Sea and by liners' perception that reduced U.S. port fees are now manageable costs through fleet adjustments backed by ample cash reserves, major liners actively expanding their fleets. And with continued competition in capacity expansion and the shift toward eco-friendly vessels, a solid level of new orders is expected to persist.

And tankers -- in the tanker segment, vessel supply remains constrained as the U.S. and Europe continue to expand sanctions on Russia, Iran and Venezuela. Combined with OPEC+'s production increase, this has pushed crude tanker rates higher sharply. And with firm freight rates and low order backlogs, tanker newbuilding activity is expected to gradually increase. For VLGCs and PCTCs, ordering activity has eased, following several years of exceptionally strong demand. However, once the current wave of vessel deliveries is absorbed, replacement needs for aging fleets and tightening emission regulations are expected to drive a rebound in newbuilding demand.

Following the IMO's recent failure to finalize the net zero framework, there are growing concerns that the resulting regulatory gap could dampen the investment sentiment for new buildings and alternative fuels. Nevertheless, the IMO's net zero target remains in place, and the industry broadly expects the long-term decarbonization trajectory to stay unchanged. Consequently, companies that delay participation in the clean fuel transition are likely to face increasing cost burdens over time. In this context, the group will continue to strengthen its technological leadership.

In addition, given the ongoing market volatility driven by U.S.-China strategic tensions and various geopolitical uncertainties, the group will continue to closely monitor market conditions and pursue a selective profitability-focused order strategy. Amid the rapidly changing global shipbuilding and shipping environment, KSOE remains committed to sustainable growth and shareholder value enhancement, striving to take a significant step forward as a global industry leader.

And this concludes our Q3 2025 results presentation. Thank you very much for your attention. And moving on, we're going to have [indiscernible] from Offshore & Energy.

[Unknown Executive]

[Interpreted] Good afternoon. This is [indiscernible] from Offshore & Energy. I'd like to present the performance review for the Offshore division and then share our outlook for the business. Our offshore business is actively participating in FEED and EPC biddings for various offshore projects currently being prepared in regions such as the Middle East, including the UAE, Qatar and Kuwait as well as Australia and the Americas. Among these Mid Eastern projects have adjusted their schedules with contracts signing now targeted for early 2026. Renewable energy business, particularly offshore wind power, is actively involved in the FEED process for offshore substations and domestic projects and is making efforts to expand into full EPC contracts.

Using our proprietary floating structure model, we're also engaging with multiple developers to participate in floating wind projects in Korea's East Coast, Scotland and Taiwan. And in addition, our in-house offshore substation platform model recently received an AIP or approval in principle from a classification society and which we plan to apply to upcoming FEED projects to further broaden our participation opportunities in offshore wind business.

We are currently carrying out TerraPower's SMR demonstration project in Wyoming, the United States and conducting joint research with the company to support SMR commercialization. Through these efforts, we aim to strengthen our technological capabilities and expand future business opportunities. And next, market conditions. As oil prices remain above breakeven levels, the overall offshore plant market is not overheaded but remains generally favorable. Meanwhile, demand for crude oil and natural gas for power generation is expected to continue rising and energy security is emerging as a key issue for many countries. Major oil companies are focusing investments in high-return regions such as Guyana, Brazil and Africa, while national oil companies and IOCs in the Middle East, Australia and North America are gradually expanding CapEx for domestic offshore oil and gas development.

In the Middle East, including Qatar, the UAE and Saudi Arabia and Kuwait, offshore gas field development is accelerating with large-scale projects planned and the market expected to stay active. The offshore wind market is seeing some short-term slowdown due to policy changes in the U.S., but mid- to long-term investment and capacity expansion are expected to continue. In Korea, government-led initiatives are increasing expectations for market growth, along with a stronger domestic turbine supply chain. So especially, we're expecting a structural change occurring across the industrial ecosystem here in Korea. Based on these conditions, we're pursuing a balanced approach across offshore, offshore wind and SMR businesses, focusing selectively on projects that ensure profitability and stable execution.

And that concludes our remarks on the Q3 performance and market outlook. Thank you very much.

[Operator]

[Interpreted] [Operator Instructions] The first question will be provided by Lee DongHeon from Shinhan Investment Securities.

[DongHeon Lee, analyst]

[Interpreted] Excellent presentation. First of all, congratulations on very positive performance. My question is about any remaining one-off costs they might incur. So it seems like the Kiwi settlement is almost completed. And I'm wondering whether there are any remaining costs that could be incurred due to the transformer fire incident affecting Samho. And as to the KRW 25 billion offshore project, can you tell us about what the project is, and any additional costs that you're expecting to incur from this KRW 25 billion offshore project?

[Unknown Executive]

[Interpreted] Thank you for your question. As to that one-off cost for the Kiwi settlement case, we're expecting a bit more funds to be coming into our book, and that may happen in Q4. As to the Samho transformer fire incident, we do not expect additional costs that we incur and construction is going on very smoothly. As to the offshore projects, we have P74 with 90% completion -- 78 with a completion ratio of 98% and Shenandoah 97%, but we do not expect any sizable additional costs that will be occurring.

[Operator]

[Interpreted] The following question will be presented by Tower Investment Securities, [indiscernible].

[Unknown Analyst]

[Interpreted] My question is about LNG market outlook, and this concerns Mozambique some of the slots. And it seems like compared to Samsung and other competitors, I think in 2029, you may have more slots to use. So my question is, what do you think of the order outlook for LNG on ships? And what would be the vessel prices that you're anticipating for next year?

[Unknown Executive]

[Interpreted] Thank you for your question. And about LNG newbuilds, in fact, this year was quite disappointing. But starting from the second half, thanks to the resumption of approval on the part of the U.S. Trump administration, and that's for -- that's the approval of export projects. We have five relevant projects that have been approved in the United States. And worldwide, we have six LNG projects, and that is translated into 57 million tons, but such orders would be realized from 2029, I think.

So globally, we have increasing interest in LNG and with increasing inquiries about newbuilds. As to the exact number of vessels, I cannot give any definitive answer. But as a rule of thumb, 1 million ton is translated into two vessels. So thinking of 56 million ton, that will be more than 100 vessels. As for the vessel prices, based on the demand, I think now ship owners believe the vessel prices are bottoming out, which means the vessel prices may increase gradually.

[Operator]

[Interpreted] The next question will be provided by Bae Kiyoun from Meritz Investment Securities.

[Unknown Analyst]

[Interpreted] I have two questions. And my first question is about commercial ships. As to the container ships, you mentioned that liners would continue to place orders because of the transition into greener ships and greener fuels coming into next year. But there have been so many contracts that have been awarded already. So as an analyst, we need a bit of confidence about whether this trend towards the green transition would continue next year as well. It has been already covered by several news articles, but I'm wondering whether you are getting inquiries from key liners? And then how many inquiries are you actually getting? And my second question is about LPG, and so many LPG vessels have been delivered. So you mentioned that new shipbuild orders may come out after such deliveries are all made. Then what would be the timing of these new LNG, LPG orders coming in?

[Unknown Executive]

[Interpreted] Thank you for your question. And as to container ships, they are primarily large-scale container ships. And liners perceive these large container ships as their infrastructure, which means it's a tool for successful competition. So liners believe they need better ships at more affordable prices. So large container, we are making consultations with large liner companies, but details are confidential. So I cannot share any details. But what I can say is numerous, a large number of liners are planning newbuilds and maybe the volume may emerge starting from next year.

As to your question about LPG, we can deliver starting from 2028. As you mentioned, many vessels have been already ordered. And in fact, LPG freight rates have turned -- are going down. So as to large LPG ships, we also have demand for ammonia fueled ships as well, but such ammonia fuel demand has come rather late, which means now LPG and ammonia are in competition. So we do not see additional demand immediately. But starting from the second half of 2026, we would be able to start delivery, and then we will see LNG demand coming and emerging.

[Operator]

[Interpreted] The following question will be presented by Lee DongHeon from Shinhan Investment Securities.

[DongHeon Lee, analyst]

[Interpreted] My question is about special ships, naval ships because I don't really see any noticeable announcement about special ships. So I'm wondering whether I can ask any questions about naval ships. So we have been -- there have been a lot of news about the so-called MASGA initiative as well as nuclear power submarines. Can you share with us any highlights about your special ship business?

[Unknown Executive]

[Interpreted] So thank you for your questions. As to the MASGA initiative and nuclear powered submarines, as you have witnessed and heard from news media articles, currently, we are focusing on a project within the United States. So we are focused on building next-generation logistics vessels for the U.S. Navy. And for this project, we are working with Huntington Ingalls Industries. So we are participating together. We are working together with Huntington Ingalls to jointly propose our -- make a proposal for this project. So initially, the deadline was the end of October, but there was a 2-week delay in the United States. So the process, the preparation and the proposal process will be completed, I believe, by early November, and that's what we are working for right now.

As to the nuclear-powered submarines, you may have heard that the Philly Shipyard will be constructing such submarines according to President Trump's announcement. And there would be consultations ongoing between the two countries, so ROK and the United States. As to such submarines, what President Trump said is such submarines will be constructed on U.S. soil, U.S. territory and then will be purchased by -- purchased later. But about exactly how this project will be executed, I believe there would be disagreements between the United States and Korea. And such a big project cannot be executed by any single shipyard in terms of capabilities or workforce size. Such a big project, I believe the nuclear power submarine would be a national project.

And I'd like to tell you that recently, we have merged with Mipo, significantly increasing our construction capabilities. So we already have construction capabilities and facilities for the ROK Navy. We also think of Canadian Navy as well. And in preparation, we have significantly expanded and scaled up our construction capabilities for special ships.

I'd like to make some additional comments about nuclear-powered submarines, and this is an issue which is receiving plentiful interest these days. You may think this is in the development phase. But once this project is -- begins at full scale, it's going to require tremendous engineering capabilities and especially combined and integrated capabilities. So that is why at the national assembly, this project is considered a national project because no single shipyard would be able to -- would be sufficient in terms of putting in all its resources.

So it's a pan-ministry and pan-government project, and we have two major shipyards here in Korea capable of constructing submarines. And this is going to be a joint project, I believe, if it is ever realized. So at someday, we are making preparations to participate in this project if it starts.

But about the local construction in the United States, then it's not an R&D -- domestic R&D project or initiative anymore. So last week, when we had a national audit, there were a lot of questions that were posed to the Ministry of Defense. But if it is -- if such submarines are constructed within the United States, then this project would lose its visibility to a significant extent. So there will be a lot of exchanges between the U.S. and Korean governments. And then I'd like to provide part two of my answer.

And we have just released a -- made a press release this morning, which is we're going to work with SIMA Shipyard in Peru to jointly develop submarines. So the letter of intent has been signed and then we will move on to the next contracting phase. And this means we're going to be able to build our track record in submarine development. And then globally, we will be able to target on the submarine export market as well. And such a project is working with national government. And even though it has been announced yet, there are more potential projects that could be leading to the next phase of project development. And these projects will be announced at the end of this year or early next year, I believe. And then in the next quarter, when we have an earnings release next quarter, I hope we would be able to share even more tangible progress as to our special ship business.

[Operator]

[Interpreted] The next question will be presented by Yeon Sung Jung from NH Investment Securities.

[Yeon Sung Jung, analyst]

[Interpreted] I have two questions. The first question is about special and naval ships. So in addition to the United States and Korea, can you share with us any export market projects that are ongoing, for example, in the Southeast Asia, Latin America and Europe as well? And second of all, we are still focused on submarines these days, but I know that your company has strength in building surface ships as well. So anything more that you can share concerning your surface ship business?

[Unknown Executive]

[Interpreted] Thank you for your question. And currently, the Navy modernization project is ongoing with the Philippine Navy. And for additional orders, negotiations are ongoing. So we cannot disclose details, but if we share any news for the first time about our export cases, then it's going to be the Philippines and especially frigates for the Philippine Navy. And once we build a track record working with Peru and the Philippines, then we'll be able to advance into Southeast Asia and other countries because there are countries interested in our frigate construction capabilities. So consultations are ongoing, but in this sense, we're in competition against our European competitors. So it's not easy. But we already have a demonstration model. So in that sense, we have strength.

And as to submarines, once we develop submarines and demonstrate the submarines while working with Peru, then we already have Portugal, which is interested in our projects. And especially it's below 2,000 ton submarines. In the sense, I think we can build our competitive edge for 2,000 ton and below submarines. And as to submarines -- potential submarine projects with Canada and Poland, under the one team spirit, both companies are responding to potential project needs, integrating our capabilities. And I hope that I can share good news next year.

[Operator]

[Interpreted] The following question will be presented by Kang Kyungtae from Korea Investment Securities.

[Kyung-tae Kang, analyst]

[Interpreted] Commercial ship exports of Mipo because before and after the merger, it seems like order activities of Mipo have virtually stopped. So Mipo has a shipyard in Ulsan. And my question is about the division of labor, I would say, or functionalities. Because when I look at mid-range tankers and feeder ships, it seems like order activities have again almost stopped. And as to LNG bunkering vessels, I think we have less volume this year. So what's happening to Mipo as to commercial ship efforts?

[Unknown Executive]

[Interpreted] Thank you for your questions. What I can say is the merger and Mipo's operations are not related. These are two separate issues. And it seems like Mipo's operations are stagnant. It is because the mid-range ship market itself is stagnant. So this year, it's true that orders have declined to half of last year. It's because last year in 2024, so many mid-range ships were ordered. So mid-range ships -- around 157 mid-range ships were ordered last year. But in fact, the average number is around 48. So many orders placed last year. And now this year, the mid-range -- about 36 mid-range vessels were ordered, and 10 of them are for the Philly shipyard of Hanwha. So that's only 23% of 2024. So the midrange, the market demand itself is sluggish. So it makes the situation look like Mipo is not really receiving orders.

And about the feeder market, in H1, in the first half of this year, we have filled all our delivery capacities already. So we can deliver only after 2028. And these small ships, they are perceived as commodities, which means as their deadline is postponed, then their preference -- they will lose their preferences and competitive edge as well. So it seems like order activity is stagnant. But again, I'd like to say the market itself is sluggish and stagnant.

The merger takes effect from the November 1 of this year, speaking of the merger between us and -- December 1 of this year that the merger will take effect. But any change in revenue would be witnessed only after 2028. It's because the slots are already filled by 2027. So if it is for strategic orders targeting the United States, that will be referring to next-generation logistics vessels and strategic commercial ships. Even though we receive orders right now, these will be recognized as revenue only after 2028.

[Operator]

[Interpreted] The following question will be presented by Han Young Soo from Samsung Securities.

[Young-Soo Han, analyst]

[Interpreted] I have two questions. The first question is about the proportion of profit, I would say, between Hyundai Heavy Industries and Mipo. And it seems like Mipo's profit margin has improved greatly. Initially, we were worried that this merger would rather dilute the overall profitability, but it seems like it's not the case, and this is highly encouraging. So when we look at the overall picture, my question is, the profitability of these two companies would converge to quite an equitable level? Or is it -- or is that Hyundai Heavy Industries margin would go up further and Mipo would maintain the current level of profitability. So the proportion of contributions, I would say, to the overall profitability between Mipo and Hyundai Heavy Industries. That's my first question.

And my second question is about offshore structure because the order activities are being delayed, and we have worries that profitability may decline. So my question is until when should you engage in ordering activities so that it will eliminate any worries or concerns about the profit of offshore structure business.

[Unknown Executive]

[Interpreted] To answer your first question, it's true that Mipo's OP margin has improved significantly to a close level to almost equal level of Hyundai Heavy Industries. But of course, Hyundai Heavy Industries would have an higher OP margin overall compared to Mipo. And in fact, the losses from Offshore Plant business was covered by Engine business at Hyundai Heavy Industries. As to the commercial ships, actually, the LPG proportion is higher within Hyundai Heavy Industries. So overall margin would be higher within Hyundai Heavy Industries compared to Mipo. But I think next year, OP margin of both companies would rather converge to quite a similar level.

And as to the offshore structure business, our Trion project is accelerating and the Ruya project has just begun. And we're -- so if we continue with our ordering activities until the first half of 2026, then at least on revenue basis, we won't have declines happening. And in fact, biddings are mostly concentrated in the first half of next year. So you may look forward to this market.

And I'd like to make one correction. When I answered your first question, I mentioned LPG, but it's not LPG, but LNG. That's one correction that I'd like to make.

[Operator]

[Interpreted] The last question will be presented by from Oh Mike from Daiwa Securities.

[Mike Oh, analyst]

[Technical Difficulty]

[Unknown Executive]

[Interpreted] Due to technical glitch, we couldn't really receive this question, and we'd like to entertain one final question.

[Operator]

[Interpreted] The final question will be presented by from Lee DongHeon from Shinhan Investment Securities.

[DongHeon Lee, analyst]

[Interpreted] My first question is, I think your commercial business is experiencing quite rapid growth in revenue and sales. So my question is about the possibility of early delivery of your commercial ships. And the second question is as to your special ship business. When are you going to establish a corporation or subsidiary in the United States?

[Unknown Executive]

[Interpreted] As to your first question, as you said, starting from the second half of last year, 2024, the pace of revenue generation is really speeding up and being accelerated, and this is translated into early deliveries. So this year, we already have 10% to 15% acceleration. And this is, again, is translated into faster construction. And that would happen this year and next year as well.

And as to our U.S. subsidiary, please wait and see, and your patience would be greatly appreciated. We're making preparations. Previously, we told you that we are in the preparation phase. And now I hope we can share any updates that we make on our U.S. subsidiary as soon as we make proper preparation.

[Operator]

[Interpreted] Thank you very much. With this, we'd like to conclude Q3 2025 KSOE earnings presentation.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]