Hanwha Systems' Operating Profit Down 60% Due to Philly Shipyard Investment: "Nuclear Submarine Plan Undecided"

[Korea Financial Times, Shin Haeju] Hanwha Systems (CEO Son Jae-il) saw its third-quarter operating profit decline over 60% this year due to initial investment costs at Hanwha Philly Shipyard.

Through its Q3 2025 earnings conference call on the 31st, Hanwha Systems announced consolidated sales of KRW 807.7 billion and operating profit of KRW 22.5 billion. Sales increased 26.41% year-over-year, while operating profit decreased 62.67%.

A Hanwha Systems official explained, "Philly Shipyard generated sales of KRW 168.4 billion and operating loss of KRW 39.0 billion in Q3 this year," adding, "This was mainly due to previously omitted cost items being reflected and costs invested for normalization."
The operating profit margin rose 0.4 percentage points year-over-year to 10.3%. A company official stated, "The export proportion within the defense sector is around 18%, and the margin rate maintains last year's level," adding, "Although the domestic mass production proportion decreased, improved development and maintenance demand and export margin rates maintained the operating profit margin."

They continued, "We plan to invest approximately KRW 30 billion in in-house development costs this year, including satellite launches and export product-related investments," adding, "Since KRW 6 billion of this was reflected in Q3, it acted as a margin defense factor."

By sector, the defense segment recorded sales of KRW 481.4 billion and operating profit of KRW 49.8 billion, up 3% and 8% respectively year-over-year. Conversely, the ICT segment saw sales of KRW 155.7 billion and operating profit of KRW 12.0 billion, down 8% and 18% respectively, following the conclusion of Hanwha Aerospace's enterprise resource planning (ERP) business.

The other segment recorded sales of KRW 170.6 billion and operating loss of KRW 39.3 billion. Philly Shipyard, acquired in December last year, was incorporated as a consolidated subsidiary from Q1 this year, resulting in losses as related one-time costs were reflected.

Regarding Hanwha Group's announcement of a $5 billion investment in Philly Shipyard, when asked whether nuclear submarine construction was considered at the time, Hanwha Systems stated, "Consultations between the two governments are in early stages, and specific plans will be shared later."

Regarding the Cheongung-II (MSAM-II) multifunctional radar (MFR) supply contract signed with LIG Nex1, they said, "While not significantly different from existing UAE and Saudi Arabia contracts, the radar proportion of around 30% has been somewhat reduced," adding, "This is a contract to supply eight batteries to the Iraqi Ministry of Defense, smaller in size than previous contracts." They added, "There are still unachieved contracts, so we can look forward to the future."

Regarding the timing of small satellite system contractor selection, they stated, "Mass production contractors are expected to be decided next year, but it will be flexible depending on the Ministry of Defense's schedule," adding, "It was originally scheduled for the first half of next year, but we currently see it as sometime next year."

Shin Haeju (hjs0509@fntimes.com)