Hanwha Group officially enters the "ship's heart" business by acquiring the second-largest marine engine manufacturer!

Following the acquisition of Hanwha Ocean (formerly Daewoo Shipbuilding) in May last year, Hanwha Group, a South Korean military industry giant, has made another move in the shipbuilding sector, successfully completing the acquisition of HSD Engine Company, the world's second-largest manufacturer of low-speed marine engines, officially entering the marine engine business, known as the "heart of ships."

Hanwha Engine is here! Hanwha Group completes acquisition after a year-long process.

On February 27, HSD Engine held an extraordinary general meeting of shareholders, voting to approve amendments to the articles of association, including changing the company name to "Hanwha Engine Co.", as well as the election of new directors and other relevant resolutions.

Yoo Moon-ki, former head of the investment strategy division at Hanwha Impact, Hanwha Group's petrochemical subsidiary, has been appointed as the first representative director of Hanwha Engine Company. Yoo previously served as the head of Hanwha Group's advanced materials business development division and head of the new business division before being transferred to Hanwha Impact as head of investment strategy.

Previously, on February 12, Hanwha Group announced that the application for corporate merger review of Hanwha Impact's acquisition of HSD Engine Company had been finally approved by the Korea Fair Trade Commission (KFTC). A Hanwha Impact official stated: "Following the approval of the merger review by major exporting countries, the Korea Fair Trade Commission has also approved this acquisition, and the acquisition process is now complete. HSD Engine Company will be officially renamed Hanwha Engine Company."

In his inaugural address, Yoo Moon-ki stated: "The new name, Hanwha Engine Company, signifies that the company has become a member of the Hanwha family, and it also signifies the strong growth momentum that possesses the potential to take on new challenges. In order for every employee to provide customers with value that competitors cannot imitate, and to meet future challenges, the company will undergo self-renewal."

Hanwha Group's acquisition of HSD Engine Company took a full year. On February 16 last year, Hanwha Impact signed a memorandum of understanding (MOU) to acquire a 32.8% stake in HSD Engine Company for 226.9 billion won (approximately US$177 million), with 19% being the acquisition of old shares and 14% being the paid-in capital increase of new shares.

According to International Ship Network, HSD Engine Company is South Korea's second-largest manufacturer of marine engines after Hyundai Engine Company (HHI-EMD), and has supplied marine engines to former Daewoo Shipbuilding and Samsung Heavy Industries for many years. Its predecessor was Hanjin Heavy Industries Engine Company, established in 1983. In 2000, Hanjung, DHI, and SHI jointly established HSD Engine Company. In 2005, HSD Engine Company was renamed Doosan Engine Company. From 2015 to 2016, to offset their own losses, Samsung Heavy Industries and Daewoo Shipbuilding disposed of their shares in Doosan Engine Company. In March 2018, as Doosan Heavy Industries sold its shares in Doosan Engine to two South Korean private equity funds, the controlling shareholder of Doosan Engine changed, and it was renamed HSD Engine Company again.

In 2013, HSD Engine Company successfully commercialized the world's first dual-fuel low-speed marine engine, and also pioneered the development of ship-based environmentally friendly low-temperature denitrification equipment (LPSCR), which was successfully commercialized in 2014. Low-temperature denitrification equipment is an environmentally friendly device that can remove more than 90% of nitrogen oxides from exhaust gases.

Shipbuilding + Engine Manufacturing! Hanwha Group's integration of the shipbuilding industry chain shows initial results.

South Korean shipbuilding industry insiders say that through this acquisition, Hanwha Group's competitiveness in the shipbuilding market is expected to further improve. In particular, as HSD Engine Company has already made its mark in the field of environmentally friendly engines, it is expected to add new impetus to Hanwha Ocean's bid for dominance in the future shipbuilding market.

In recent years, the South Korean shipbuilding industry has been focusing on securing high value-added new ship orders centered on environmentally friendly ships. Hanwha Ocean also signed a contract in January this year with an Oceania shipowner for the construction of two 93,000 cubic meter very large ammonia carriers (VLACs). A relevant person in the South Korean shipbuilding industry said: "With the official establishment of Hanwha Engine Company, which has advantages in the field of environmentally friendly engines, it will create a great synergy effect with Hanwha Ocean."

Hanwha Impact plans to produce dual-fuel engines based on its own hydrogen-mixed gas turbines and other environmentally friendly power generation technologies, combined with HSD Engine Company's manufacturing capabilities, to preemptively respond to international decarbonization regulations.

Following the acquisition of Daewoo Shipbuilding, Hanwha Group's completion of the acquisition of HSD Engine Company will provide a "comprehensive shipbuilding manufacturing solution" with its own production and technological capabilities, that is, improving market competitiveness in terms of delivery time and price, enhancing shipbuilding maintenance capabilities, and laying the foundation for stably responding to the changing risks of the global shipbuilding market.

Hanwha Group emphasized that it will strengthen the development of environmentally friendly marine engines as the decarbonization process in the marine sector accelerates. Following the acquisition of HSD Engine Company, synergy will also be created through cooperation with Hanwha Power Systems, a subsidiary of Hanwha Group in the energy equipment sector. In July 2022, Hanwha Group announced that Hanwha Impact would acquire Hanwha Power System, an energy equipment subsidiary of Hanwha Aerospace. Hanwha Impact plans to strengthen its technological capabilities in the power generation equipment sector based on this acquisition.

Vertical integration will provide a special advantage in producing engines that can use alternative fuels. Hanwha Group said it plans to combine Hanwha Power System's technology with HSD Engine Company's engine manufacturing capabilities to produce environmentally friendly fuel engines such as ammonia and hydrogen, and will combine Hanwha Power Systems' industrial air and gas compression technology with HSD Engine Company's generator production capabilities to enhance competitiveness in the power generation equipment sector.

According to International Ship Network, HSD Engine Company has extensive experience in developing methanol fuel engines. In September 2022, the company signed a joint development project with WinGD to deliver an engine capable of using methanol fuel by 2024.

Returning to profitability after three years, HSD Engine starts anew under new ownership.

Along with joining its new owner, HSD Engine Company successfully returned to profitability last year after three years, achieving an operating profit of 8.7 billion won (approximately US$7 million) for the year, an increase of approximately 38 billion won (approximately US$29 million) compared to the operating loss of 29.5 billion won (approximately US$22 million) in 2022.

In 2023, HSD Engine Company achieved operating revenue of 854.4 billion won (approximately US$644 million), a year-on-year increase of 11.8%; the net loss for the period was 400 million won (approximately US$301,300), a significant reduction compared to the net loss of 40.3 billion won (approximately US$30.35 million) in 2022.

South Korean shipbuilding industry insiders say that HSD Engine Company successfully turned a profit in 2023. This was due to an increase in engine supply and the company's focus on profitability through continuous efforts to improve order quality. That year, the company not only achieved growth in operating revenue but also improved efficiency through internal improvements, resulting in a positive operating profit margin compared to the previous year. In 2023, the company's operating profit margin was 1.0%, a 4.9 percentage point increase from -3.9% in 2022. With the increase in engine shipments and sales, the company's cost-to-revenue ratio also decreased from 99.7% in 2022 to 94.9% in 2023.