Business Performance for 1Q 2004

As of the end of March, HHI has won a total of $5.99 billion in new orders for the year, up 146% over the same period of 2003. The Shipbuilding Division, in particular, posted a robust performance for the first quarter of the year, with $4 billion worth of new orders, already achieving 89% of its annual sales target and posting 122% yearon- year growth. By ship type, the division has received new orders for 12 tankers, 29 containerships and 14 LNG carriers (totaling 3.8 mil. GT worth $3.95 billion). Also noteworthy is that the product mix is centered on high value-added vessels, including large-size oil tankers, containerships and LNG carriers. Given such a feat, the company has secured 40 months worth of order backlog (totaling 211 vessels, 15 mil. GT worth $12 billion) as of the end of March. The company plans to maximize profitability in overall operations in the remaining period of the year on the back of its solid order backlog, focusing efforts on raising shipbuilding prices and winning new orders for high value-added vessels, including LNG carriers. HHI has built a total of 10 LNG carriers, prior to the four ordered this year.

Shipbuilding Market Outlook for 2004

New orders for vessels have been brisk this year amid the sharp increase in seaborne cargo volume,benefiting from the solid economic recovery around the world and the continued rapid growth of the Chinese economy. The world¡¯s LNG market, in particular, is soaring on the back of strong demand for clean energy. This brightens prospects for the LNG carrier business. In the US, for example, LNG consumption in 2003 doubled from the previous year, and the share of LNG in national entire energy consumption is expected to increase from the current 2% level to 8% by 2010, according to the US. Energy Information Administration. With the oil majors expected to place orders for 20~30 vessels each year for the next few years to come, the shipbuilding market will enjoy stable business operations for quite some time. Shipbuilding prices have maintained steady increases since bottoming out at the end of 2002. VLCC newbuilding prices as of March 2004 rose more than 35% from 2002, almost reaching a 10- year high. HHI¡¯s Shipbuilding Division will continue to see robust business as shipbuilding prices gain strength from the strong won.

Order recovery in Offshore & Engineering and Industrial Plant & Engineering.
Solid business in Engine & Machinery and Construction Equipment

The Offshore & Engineering Division and the Industrial Plant & Engineering Division are showing promising starts, shaking off the disappointing business environment of last year and winning $744 million and $426 million, respectively, in new orders, reflecting sharp year-on-year increases in new orders since the beginning of this year. The Engine & Machinery Division also posted strong results in the first quarter, winning $330 million worth of new orders for ship engines, a 122% increase yearon- year on the back of brisk activities in the shipbuilding sector. The Construction Equipment Division won $380 million in the same period, a 68% increase from last year amid the business boom in China. Its local subsidiaries in Changzhou and Beijing have maintained the No.1 position among foreign brands in the excavator sector in China for two consecutive years with a market share of 23.6%. This year, the division has sold a total of 3,187 excavators in China as of the end of March.

Comments

At present, shipbuilding share prices, including HHI, are experiencing downward adjustment owing to market concerns about decreasing profitability due to price hikes in steel plates and the strong won. However, the impact on the shipbuilding market of the price hike in steel plates is not expected to be heavy, with newbuilding price for ships outpacing those for steel plates. In addition, HHI is taking a multi-pronged approach to ensuring stable profitability, actively hedging through forward exchange transactions against exchange risk from the strong won, and reducing costs through joint purchases of raw materials with its affiliates.

For more information, please contact HHI¡¯s IR Department

Seoul Office
Tel: (+82 2) 746-4570, 4555, 4541, 4728, 7454

Director
Moon Jong-bak
jbmoon7@hhi.co.kr

Senior Manager
Cho Young-cheul
choyc@hhi.co.kr

Son Sung-min smson@hhi.co.kr
Kang Min-kyung kmimk@hhi.co.kr