Hanwha Aerospace (012450) Q2 2024 earnings summary

Executive summary

• Q2 2024 consolidated sales rose 46% year-on-year to KRW 2,786 billion, with operating profit up 357% to KRW 358.8 billion, driven by export growth in Land Systems, Aerospace, and Hanwha Systems.

• Net profit declined 47% year-on-year to KRW 159.9 billion due to a high base effect from last year's one-time derivative gain and Overair convertible bond expenses.

• Significant export contracts, including Chunmoo MRLS for Poland and K9 SPH, and participation in major defense and aerospace exhibitions supported business momentum.

• Revenue and operating profit also benefited from increased ICT sales to affiliates and cost reductions.

• Notable developments include the spinoff scheduled for September 2024 and the signing of major contracts for AESA radar and MSAM MFRS in Saudi Arabia.

Financial highlights

• Pretax profit for Q2 was KRW 138.9 billion, down 59% year-on-year.

• Land Systems sales up 122% year-on-year to KRW 1,333 billion; operating profit up 1,089% to KRW 261 billion.

• Aerospace sales increased 40% year-on-year to KRW 562.4 billion; operating profit up 36% to KRW 7.5 billion.

• Hanwha Systems sales up 13% year-on-year to KRW 687.3 billion; operating profit up 167% to KRW 79.8 billion.

• Net profit margin fell to 5.7% from 15.8% year-on-year.

Outlook and guidance

• Land Systems export shipments expected to grow quarter-on-quarter through Q4 2024, with Q3 and Q4 volumes larger than Q2.

• 2024 guidance maintained at 60 K9s and 30 Chunmoos or more, with upside potential.

• Aerospace anticipates increased sales and GTF engine deliveries, though RSP operating loss may grow.

• CapEx for 2024 and 2025 projected at KRW 500–600 billion.

• Dividend policy to reflect profit growth, with further value-up disclosure planned by year-end.