Hanwha Ocean Co., Ltd. (A042660) Earnings Call Transcript

Good afternoon. I am Han Sang Yun, Head of IR at Hanwha Ocean. I would like to thank everyone for joining the call on Hanwha Ocean's 2025 Q2 performance. Also joining the call, we have Shin Yong-In, Head of Finance; Tan Chang Min, Head of Planning and Coordination; Shin Jun-Hyun, Head of Operations Strategy and Planning; Kim Hoonmin, Head of Commercial Vessel Sales team; Cho Yongseok, Head of Offshore Marketing; [ Kyun Jeong ], Head of Naval Ship Planning; and [ Lee Ook Yong ] Head of E&I Planning. During the call, the company will explain the business performance, market conditions and order outlook, followed by Q&A with participating analysts. Now the company will brief you on Q2, 2025 business performance and highlights.

Good afternoon. I am Shin Yong-In, CFO of Hanwha Ocean. I'll present on the business performance and financials. I will brief you on the Q2, 2025 performance. Please turn to Pages 5 and 6 of the presentation. On a consolidated basis for Q2 '25, the company recorded KRW 3.2941 trillion in sales and KRW 371.7 billion in operating profit and KRW 148.5 billion in net profit. Q2 sales have increased by 5% Q-on-Q, which was largely due to an increase in operating days driven by seasonality as well as a higher proportion of sales from high-margin LNG carriers. Operating profit for the quarter increased significantly Q-on-Q, supported by further improvements in product mix as revenue recognition from low-priced containership orders continued to decline and the proportion of sales from high-margin LNG carriers increased. Productivity has increased steadily, thanks to production stabilization and cost-cutting initiatives have been implemented in parallel to maximize the profitability. In this quarter, while there was onetime loss of about KRW 50 billion due to decline in exchange rate, the company reached an amicable agreement with the shipowner regarding the project for which a delivery date change was disclosed. As a result, approximately KRW 50 billion in previously recognized liquidated damage was reversed leading to a onetime gain that had a positive impact on the results. Please turn to Page 7 for financials. The total assets as of the end of Q2 '25 has increased by KRW 126 billion Q-on-Q to KRW 18.3037 trillion, and cash and cash equivalents has increased by KRW 58.3 billion Q-on-Q to KRW 1.0468 trillion. As of the end of Q2 '25, total liabilities have decreased by KRW 11.2 billion Q-on-Q to KRW 13.0779 trillion, and the total debt declined by KRW 492.5 billion Q-on-Q to KRW 5. 0282 trillion. Net debt has declined by KRW 550.8 billion Q-on-Q to KRW 3.9814 trillion. Cash inflows expanded due to increased operating receipts from the delivery of high-priced LNG carriers and milestone payments for naval vessels. As LNG carrier deliveries are expected to continue in the second half of the year and beyond, the company anticipates further improvements in cash flow and a gradual reduction in outstanding debt. The liabilities to equity ratio has declined slightly Q-on-Q to 250% this quarter, which is in line with the shipbuilding industry average and the company maintains a solid financial structure. Next, from Page 8 and onward, I will share with you the Q2 '25 business performance and the whole year outlook by segment. First, the commercial vessel business, which accounts for 80% of the total sales for Q2 '25. The sales from the commercial vessel business grew by 9% Q-on-Q to KRW 2.8068 trillion, due to higher construction volume from increase in operating days with the ongoing expansion in the proportion of LNG carrier sales. Q2 profit recorded KRW 377.1 billion, with the profit margin widening driven not only by a one-off gain from the reversal of approximately KRW 50 billion in liquidated damages, but also by structural improvements such as the continued enhancement in product mix centered on high-priced LNG carriers, ongoing production stability and cost reduction efforts. Looking ahead, commercial vessel BU is expected to continue accounting for over 70% to 80% of the company's total revenue with LNG carrier sales consistently making up around 60% of the total revenue. In addition, the revenue contribution from projects contracted, since 2023 is expected to steadily increase, supporting a solid trend in recurring profit, even excluding one-off factors. Next, Naval Ship business. Revenue declined to KRW 236.8 billion compared to the previous quarter as the construction of the lead ship of the Changbogo-III batch 2 program entered its final stage. Despite the Q-on-Q decline in profitability, second half revenue is expected to exceed first half levels and a stable profit margin is expected with the commencement of full-scale cost input for the second ship of Changbogo-III batch 2. Lastly, offshore business. As the performance upgrade of the drillship was completed and delivered at the end of June, revenue was recognized in full at once, resulting in a 24% Q-on-Q increase to KRW 288.1 billion. Although the pace of profit improvement remains slower than in other BUs, efforts will be made to enhance profitability through tight schedule control and secure change orders. This concludes the briefing on business performance by segment. Now we will hear from each business unit on respective market conditions and order outlook.

Good afternoon. I am Kim Hoonmin, Head of Sales Planning at Commercial Vessel BU. I will brief you on the market condition and order outlook for the commercial vessel BU. Please turn to Page 12 of the presentation. Since '22, the prolonged war in Ukraine and the ongoing Red Sea crisis, along with various geopolitical factors such as tariff policies following the U.S. President Trump's administration. The USTR's imposition of port entry tariffs on China-built vessels and the push for the introduction of the CHIPS Act have continued to affect the market. Amid an unprecedented level of uncertainty surrounding geopolitical risks in the ship building industry, the company's commercial vessel BU has maintained a solid order intake, having secured a total of 16 vessels worth USD 3.13 billion as of second quarter '25, including 2 LNG carriers and 8 VLCCs and 62,400 TEU container ships in contrast to a sharp drop in global newbuilding orders, which have fallen below 50%. Following the reelection of President Trump, most shipping companies have adopted a wait-and-see approach in the newbuilding market due to heightened uncertainties stemming from the USTR's imposition of port entry charges on Chinese-built vessels, the proposed enactment of the CHIPS Act and the IMO's consideration of midterm decarbonization measures choosing to condition -- choosing to hold back until the clearer policy directions are confirmed. Nevertheless, favorable market conditions have been created for the company, driven by expectations of sanctions against China and the Trump administration's deregulation of the energy sectors and the resumption of LNG projects, which have led to increased demand for fossil fuel transportation. In particular, steady newbuilding demand for major vessel types such as LNGC, VLCC and the VLEC is being supported by the rise in the U.S. LNG and crude oil exports. And the company continues to pursue a selective order strategy focused on profitability in response to these trends. Amid escalating tensions between the U.S. and China, there is growing global scrutiny over Chinese-built vessels as seen in the USTR strengthened sanctions on Chinese ships and the ongoing push for the CHIPS Act. This is expected to serve as an opportunity to increase preference for shipyards with a high level of technological reliability such as ours. In addition, following the recent conclusion of the MEPC 83, regulations on greenhouse gas emissions from ships have become more concrete and continued growth in demand is anticipated for eco-friendly propulsion vessels, an area where the company maintains a strong technological competitiveness. While we will not disclose a specific order target for this year, we plan to focus our order intake on LNG carriers, container ships, VLACs and VLECs and the VLCC with the aim of maintaining our current order backlog equivalent to more than 3 years of work through the end of the year. The following is an update on market conditions and order prospects by vessel type, beginning with LNG carriers. The LNG carrier market has recently showed signs of stagnation due to low charter rates relative to newbuilding prices. However, with the new LNG export terminals in the U.S. expected to become fully operational soon, charter rates are anticipated to rise and availability of the U.S.-based chartered vessels to decline, which is expected to positively impact market conditions. In addition, the low freight environment is likely to accelerate the retirement of older inefficient steam turbine LNG carriers whose charter contracts have expired. Accordingly, in addition to newbuilding demand linked to upcoming U.S. LNG export projects, replacement demand for aging steam turbine vessels is also expected to gradually increase. Furthermore, policy-related factors such as the potential implementation of the U.S. CHIPS Act could influence new demand, although the actual impact will depend on how specific and concrete the legislation becomes requiring continued monitoring. Next, VLCC market updates. Currently, VLCCs show a relatively low order backlog amounting to only around 11% of the existing fleet, indicating a structural strong replacement demand. However, due to weak recent charter rates, uncertainties surrounding the U.S. energy policy and the anticipated tightening of IMO environmental regulations, some clients continue to adopt a wait-and-see approach. Going forward, if policy directions become clearer and the sanctions on Iran and Russia are eased, the potential transfer of ownership of aging vessels within the shadow fleet may accelerate vessel scrapping. Notably, the recent rebound in certain VLCC charter rates observed this year is a positive indicator of a potential recovery in demand. While in the second half of this last year, the only VLCC order placed at a Korean shipyard was a single vessel ordered by Hanwha Shipping through our company. The fact that Korean shipyards have secured a total of 10 VLCC orders in the first half of this year already suggests that the market has started to recover. Next, gas carrier market update. While VLGC orders may slow somewhat in 2025 due to the large volume of orders placed over the past 2 years, U.S.-Asia LPG export remains strong and the major shipping companies continue to show valid demand for dual fuel propulsion vessels. For VLECs, vessel demand is expected to remain steady in response to capacity expansions of ethane crackers by Asian petrochemical companies, in particular, due to the impact of the U.S. policy, including the cancellation of some VLEC contracts at Chinese shipyards. Demand is likely to be concentrated on Korean shipbuilders for the time being, and the company is also expected to benefit from this trend. As for VLACs, demand is anticipated to be linked to blue and green ammonia projects, although the number of visible or committed projects remains limited at this stage. Lastly, update on containership. Due to Alliance restructuring, European shipping companies led the ordering of larger container vessels through last year. In 2025, however, order activity is expected to expand among Asian shipping lines, which had previously shown relatively low levels of ordering. That said, as operations in the Red Sea region have been significantly disrupted, there remains a concern over temporary oversupply of capacity once the situation is resolved. Currently, orders for vessels of 12,000 TEU or larger accounts for 50.4% of the total fleet. And going forward, new orders are expected to shift towards small and midsized eco-friendly container ships of 10,000 TEU or less. In addition, depending on the stringency of upcoming IMO environmental regulations, there may be strong replacement demand for older container ships with conventional engine types, which we will continue to monitor very closely. Among commercial vessel types, container ships are likely to be the most directly affected by the USTR sanction on Chinese shipyards. Accordingly, we plan to closely monitor potential order opportunities for Korean shipbuilders in light of changes in fleet deployment strategy by major shipping companies. This concludes the briefing on the market conditions and order outlook by major commercial vessel types. Thank you.

Let's hear from the Naval Ship BU. Good afternoon. I am [ Kyun Jeong ] in charge of Naval Ship Planning. The global security landscape is undergoing more rapid changes than ever before. The prolonged Russia-Ukraine war, rising military tensions between the U.S. and China and stability in the Middle East and growing uncertainty surrounding the Korean Peninsula are all contributing factors. In particular, intensifying [indiscernible] military competition is prompting countries to invest heavily in securing sovereignty over their territorial waters and establishing strategic maritime superiority. Against this backdrop, the role of naval defense is becoming increasingly important. No longer limited to basic maritime petrol functions, the domain is rapidly advancing in various areas such as submarines with underwater combat capabilities, icebreakers capable of operating in polar and high latitude environments and unmanned maritime systems. In line with this evolving trend, Naval Ship BU of Hanwha Ocean is expanding its business beyond the traditional warship construction to position itself as a key provider of strategy defense assets, actively pursuing opportunities across a broad range of naval vessels. Most notably, the company recently secured another MRO order from the UFS chart through from the U.S. Navy, marking a meaningful achievement. This represents the third U.S. Navy vessel order won by our company, making the accomplishment even more significant. Hanwha Ocean has taken the lead in pursuing contracts with the U.S. Navy in the most proactive and strategic manner. And this latest success demonstrates that the company's sustained efforts and technological capabilities have been formally recognized by the U.S. Navy. In addition, to strengthen its responsiveness in the North American market, Hanwha Ocean is actively pursuing participation in the Canadian Navy's next-generation submarine program. The project expected to involve 8 to 12 submarines is a mega scale initiatives estimated to be worth up to KRW 60 trillion, including MRO services. In June, Hanwha Ocean's Board of Directors approved the establishment of a local subsidiary in Canada to enhance its localized strategy and ensure rapid on-the-ground responsiveness. In parallel, diplomatic support at the government level is also underway as a member of the National Assembly's Defense Committee visited Canada last week at a presidential envoy to discuss bilateral defense cooperation. Amid these ongoing efforts to expand strategic orders in the global market, Hanwha Ocean was also recently selected as the preferred bidder for the next-generation icebreaking polar research vessel project commissioned by the Korea Hydrographic and Oceanographic Agency under the Ministry of Oceans and Fisheries. The planned vessel will be over twice the size of the existing our own with the displacement of the 16,000 tons. It represents not only a significant increase in size, but also a marked advancement in technology. It will adopt an eco-friendly electric propulsion system powered by the dual flow fuel LNG engines and will be capable of breaking through the ice up to 1.5 meters thick in both forward and reverse directions with PC3 icebreaking performance. Its greatly extended cruising range will also enable long-duration missions deep into the polar region. This aligns with the recent global trend of surging demand for various types of icebreakers driven by the rising strategic importance of the Arctic shipping routes. In response to this shift in demand, Hanwha Ocean has been continuously developing new products in the highly advanced fields of Polar specialized vessels, further solidifying its position as a market leader. In particular, this next-generation icebreaker holds significant meaning not only as a domestic contract win, but also as clear recognition by the market of Hanwha Ocean's technological capabilities in Polar operations and its proven project execution competence. Building on its world-class expertise in submarines, Hanwha Ocean has already established a strong foothold in the global naval defense market. With this new addition of an eco-friendly polar vessel, the company is now expanding its portfolio into a new lineup of sustainable [ RT ] ships. This move is expected to serve not only as a decisive reference for future icebreaker procurement program in key countries, including North America, but also as a symbolic milestone in Hanwha Ocean's strategic transition towards sustainable technological leadership amid the shifting maritime paradigm. Going forward, Hanwha Ocean will continue to lead the market as a supplier of neighbor platforms that ensures global security, while also expanding its presence across both polar and eco-friendly maritime domains. Thank you. Lastly, let's hear from the Offshore BU.

Good afternoon. I am Cho Yongseok, Head of Offshore Marketing. Please turn to Page 14. I'll brief you on the changes in the global energy and offshore markets and the resulting outlook for the oil and gas facilities and offshore plant sector. According to the International Energy Agency, or IEA, and major energy consulting firms, international oil prices, which averaged around USD 65 per barrel in May, briefly approached $85 due to rising geopolitical tensions in the Middle East and growing supply uncertainties. In June and July, prices fluctuated within the $68 to $80 range, reflecting the heightened volatility. In its July 25 report, the IEA noted that although supply may appear to be exceeding demand, actual supply conditions remain tight due to increased refinery utilization rates and the backwardation in spot markets. The agency also emphasized the continued need for strategic investment in the oil and gas sectors to ensure stable supply-demand dynamic and energy security. As many of you are aware, in April, a massive blackout across Spain and Portugal affected tens of millions of people, causing widespread disruptions in national critical infrastructure, such as railways, transportation systems, hospitals, financial institutions and telecommunications, leading to an unprecedented level of chaos. This incidence was attributed to a combination of increasingly complex transmission and distribution infrastructure and volatility in renewable energy output, which triggered an unexpected overvoltage event. It served as a stark reminder that even the most advanced power grids remain inherently vulnerable to systemic weaknesses. Most importantly, the event underscored the critical link between energy source diversification and the national industrial security. While the global shift towards renewable energy continues to gain momentum, this situation has reignited awareness of the strategic importance of traditional energy sources such as natural gas in ensuring the stability and flexibility of power systems. From the perspective of offshore business portfolios closely tied to traditional energy sources, these developments suggest the emergence of a potentially favorable business environment. Let me now provide an overview of market trends by offshore facility type. First, regarding the FPSO market. Global oil majors, including Petrobras, are leading the sector, particularly in major deepwater field is located in South America and West Africa. In 2025, approximately 70% of all new FPSO orders are expected to originate from these regions. Industry experts predict that between a minimum of 5 and up to 13 new FPSO projects could reach final investment decision this year. In the United States, at least 5 newly approved or expanded LNG projects, including the Commonwealth LNG and Port Arthur LNG are having a positive impact on the natural gas export market. These developments are also expected to serve as favorable factors for the final investment decision of ongoing nearshore FLNG investment project. FLNG demand is also expanding in the regions such as Canada, Latin America and Africa, raising concerns that the future global new build demand for FLNG units may exceed the current fabrication capacity. On the other hand, the U.S. reciprocal tariff policy may significantly affect the pricing of LNG plant-related products exported to the U.S., depending on the outcomes of the trade negotiations. In certain cases, this could positively impact the competitiveness of shipyards and module fabrication yards located in non-Chinese parts of Asia. Although the drilling market is currently showing signs of stagnation, it is generally viewed as having strong long-term recovery potential. According to the Clarkson Research, as of June 25, the global utilization rate of the drilling units stands at approximately 84%, with projections suggesting it will surpass 90% by the end of '26. In particular, operational demand for ultra-deepwater floaters is growing, especially in areas such as offshore Namibia and Norway. The offshore wind market shows regional disparities depending on the policy changes in major countries. But in the context of the global trends towards energy diversification and green transition, it is assessed to have a strong long-term growth potential. In Korea, the government plans to conduct fixed price auction totaling 5 gigawatts from '24 to '26 with a 1.25 gigawatt auction already underway in the first half of '25. Furthermore, with the new administration's reinforced policies on renewable energy expansion and decarbonization, government support is expected to increase further, serving as a positive factor for the growth of the domestic offshore wind market. As the market grows, demand for WTIV or the Wind Turbine Installation Vessel is also rising rapidly. In particular, there is a growing interest in vessels capable of installing large 15-megawatt class turbines. Although fixed bottom offshore wind development is actively progressing in Korea, particularly in the Western and the Southern coastal regions, there is currently no WTIV available that is suitable for installing such large turbines. Given that the installation demand for major domestic offshore wind project is expected to peak between '28 and '32, the placement of the new WTIV orders appears inevitable. In addition, demand is also expected to rise for HLVs, Heavy Lift Vessels used in substructure installation as well as for supporting port infrastructure for installation operations. Taken together, as the global energy transition advances, the company sees both the stable supply of traditional oil and gas resources and the stimulation simultaneous growth of the renewable energy sector, particularly offshore wind. In this environment, the company is actively pursuing order opportunities for key product lines in which we possessed strong competitiveness, including FPSO, FLNG, LNG modules and WTIVs. The offshore BU of Hanwha Ocean will continue to respond flexibly to changes across both conventional and renewable energy markets, while leading to -- leading the industry and striving to deliver sustainable and long-term profitability. Thank you.

This concludes the briefing on business performance for the second quarter of '25. Now we will take questions from the participants. The first question is from Shinhan Investment Securities. I have a question about the one-off factors. Is there any other factors than the foreign exchange fluctuation and the liquidated damage it seems that there is some differences between the operating and the nonoperating income. If there is nothing else, can we expect that this level of the profit level, the profit ratio can be maintained in the future? The answer is from the commercial vessel BU, there is a KRW 50 billion worth of liquidated damage and an additional KRW 50 billion worth coming from the decline in the foreign exchange rate, and there is nothing else in particular. And with regard to the nonoperating gain and loss, also there is the paid interest and also the valuation loss on the unbilled construction work amount to KRW 100 billion, and that is captured as the nonoperating loss. And that is based upon the valuation of the -- from the change in the foreign exchange rate. So it might go to the other direction next quarter, depending on how the foreign exchange rate fairs. Next question is from the Yuanta Securities. According to yesterday you made a report that the Vice Chairman, DK Kim is visiting the U.S. as a part of the presidential envoy and it is to do -- is it to do with the Maska project or Hanwha Ocean is playing independently or in line with the government direction? And as a follow-up question from the previous conversation is that it seems that there is a KRW 50 billion worth of FX effect on the revenue? And is it because of your cost-cutting initiatives? The answer is to respond to your second part of the question first, -- so there are multiple reasons contributing to the improvement of our profit margin, namely improvement or the acceleration of the improvement of the product mix or the P mix and ongoing production stabilization initiatives. And as a part of the operational excellence, we are making various cost-cutting measures. So they work hand-in-hand, and they are contributing favorably to our profit portfolio. And because of those reasons, despite the fall in the FX ratio that we were able to enjoy some benefit or some improvement in P&L. And regarding the recent media report about the potential collaboration between the U.S. and Korea on the shipbuilding industry, there is nothing in particular that we have identified from the company's level. If there is anything tangible that we can share, then we will definitely communicate with the market. Next question is from [ Tower ] Investment Securities. It seems that the Commercial Vessel BU has indeed a strong performance. I'd like to understand the revenue from the order intake period. So can you give us a breakdown of whether the order that you have received in '22, '23 and '24 are being constructed as of now? The answer is, currently, we are constructing mostly the volume for the orders that we have acquired in '22. And the price for the vessels that we have received an order in '22 versus the price of orders that we have received in '23 and '24. Of course, those prices are much better, much more favorable than those that we have received early on. But now-a-days, our construction is mostly focused on the volume secured in '22, but the volume secured in '23 and '24 accounts for 10% to 15% of the total sales portion. The next question is from Merit Investment Securities. I have another question about the strong profitability from the Commercial Vessel BU. I'd like to understand the portion of LNGC out of the total revenue. And out of the total LNGC revenue, what is the portion of the Qatar, the first order because unlike the original concern that we've had when you receive the order from Qatar, it seems that the profitability is much better. So the -- and also in the fourth quarter or in the early 2026, the portion of the revenue from Tanker will be significant. So I'd like to understand your prospect for the future profitability? The answer is for the second quarter of '25, LNGC revenue accounts for 60% of the total sales. And for the Qatar, so we had the 2 rounds of orders and the first round of order for the second quarter of '25 accounts for 24% of the total revenue. And it seems that versus our forecast when we received an order, it seems that our actual performance in terms of the profit is much better. That is the cost versus the point when we submitted the estimate. The price of the steel material has went down. And also, we have made the various cost-cutting efforts, and that has contributed to the improvement in the COGS. So because of those reasons, even though that we are delivering the volumes for the Qatar LNGC orders, it seems that the profitability is likely to improve going forward. The next question is from Shinhan Investment Securities. Can you please share the details of your cost-cutting measures other than the personnel rationalization and the procurement of the fixtures and equipment, is there any additional activities that are ongoing? Can we expect the productivity will continue to improve? Or has it reached its limit? Back in '22, because of the subcontractors union strike, there was a major attrition of the production staff. So we were not able to source the staff during those times. But now the shipbuilding industry started to turn around, and now we have the better resources and the staffing for the skilled workers, and that contributed to the improvement in the productivity. So considering the historical times when the company was at TSMC and since, its inclusion into the Hanwha Group, I believe that in terms of the productivity, it is close to the historical high. But it is not to say that there is additional potential upside because we are continuously making efforts to further rationalize the cost elements, not just regarding the materials cost, but also direct expenses, and we are making the cost-cutting efforts based upon the types of vessels as part of the operational excellence initiatives. Next question is from Samsung Investment Security. I have to make a 1 verification request to you. It is not to do with the one-off incidents, but I'd like to understand that was there any cases of the estimated cost was different from the actuals for the orders that you have received when there was an issue with the cost structure? And also, was there any change or -- in the settlement gain compared to the planned cost at the time of delivery of the vessels? The answer is whenever we do the quarterly closing, then we do actually do the forecasting of the total estimated cost, and it is done for the previously, the volumes that the orders was received previously as well as the ongoing volume. So because of these initiatives, the total estimated cost might change. And the reason for the profitability has improved this quarter is that out of the total estimated cost that we have continuously reflected the gains that we were able to enjoy from the ongoing cost-cutting efforts. And regarding the second part of the question, was there any change in the settlements gained compared to the planned cost at the point of delivery, yes, there are some instances that what we have set aside for the estimated cost turned out to be a bit too conservative than what has actually happened. So that turned into the profit at occasion. The next question is from [ Tao ] Investment Securities. I'd like to understand the LNGC that was placed an order by Hanwha Shipping or through the Hanwha Ocean Philly shipyards and how that is being constructed. Is it done as part of the block type? Or will that be subject to the Jones Act? The answer is that it does not subject -- it is not subject to the Jones Act because most of it is constructed at Hanwha Ocean Okpo Shipyards. What the Hanwha Ocean Philly Shipyard is providing is the guidance so that the vessels that are being constructed in the Hanwha Ocean Okpo Shipyards is in line with the U.S. Coast Guards requirement. But most of the constructions are being done at Hanwha Ocean Okpo plant, which is located in Korea. The next question is from Yuanta Securities. I'd like to ask for the guidance for the second half. You said that for the Naval Ship Business Unit, the second half performance will be better than the first half. So can I predict that the performance on a quarterly basis for the second half will be around KRW 300 billion in revenue. And in the same line, so the Korean Thanksgiving is in October this year. So does that mean that the operating days for the third and the fourth quarter, will that be fewer than that of the second quarter in terms of the absolute number of days? The answer is the operating days in the third and fourth quarter, of course, as you might think that it will be fewer because of the current Thanksgiving and other holidays -- but if that is the case that we do have the overtime that people come out and work over the weekend to keep up with the progress. So based upon our production plan, so the number of actual workdays will increase in the third and fourth quarter. And as for the Naval Ship business unit, the second half forecast for the revenue and the profit, I believe that your forecast for the KRW 330 billion of revenue per quarter in the second half is generally in line. And in terms of the profit, as we are discussing the defense industry, and we do the progress billing. So we just follow the revenue that is determined by the government and sometimes there are some ceilings. And as for the first half performance, there was a one-off event in the first quarter. So we expect the revenue and the profit will be generally in line with what we have experienced in the second quarter. Next question is from Merit Securities. I have additional question about the reserves. So I believe that you have set aside a reserve for the LNG GF containers. And considering the cost of vessels at the point of ordering, do you believe that you can make profit, not necessarily resulting to the reserve because if you considered the vessels of the similar stacks, we have placed an order -- order was placed at an amount that is $20 million, $30 million higher. So I'm asking these questions to projected profitability for the concerned project. The answer is, so the vessels that we have set aside the reserve for the gain and loss for the construction has been mostly resolved. In the first quarter, it was around 2% to 3%. In the second quarter, it went down below KRW 30 billion. So we have not established any additional reserves. So we can say that this issue has been mostly resolved. The next question is from Korea Investment Securities. The recent report suggested that you have succeeded in concluding the collective bargaining. Will that translate into any one-off expenses in the third quarter? What is the expected amount? The answer is we will know the exact amount when the time arrives. But what we have set aside as the estimated cost for the relevant item is around KRW 25 billion to KRW 30 billion. Next question is from Tao Investment Securities. I have a question about the LNG or the LNGC. Considering the full capacity of the 20 vessels, it seems that you have -- still have a lot of vacancies in the 2028. So if you are not successful in filling out all the slots with the LNGC, do you have any plan to actually fill the slot with other types of vessels such as containers. And for the CP2, the FID was concluded in 2028. And what will be the timing for the 2029? So are you hopeful that you can fill up the slots for the LNGC? The answer is that when it comes to the slots, so we do not have any dedicated slots for the LNGC. So it might not be the correct statement that the slot for the LNGC 428 is still empty or it is full. Of course, when we do not have the sufficient volume for the LNGC that we do not filled it with the containers, but rather with the VLCC or the VLEC such as gas or the tankers. And we do not have any particular concern about the dock being empty or the slot not being full. We don't have any concerns. Generally speaking, for the first half, the demand -- the global demand for the LNGC was rather weak. But according to our interpretation of the current ongoing market condition that it will be sometime around the end of this year or early next year that the demand is turning around and the potential the ship -- the vessel owners come out for the bidding and the situation will turn around during those times. The next question is from IM Investment Securities. So the competition was chosen as the preferred bidder for the Changbogo-II, the capability enhancement project. What do you believe is the reason behind it? And what kind of impact do you foresee for the submarine as well as the surface vessel market? The answer is the concerned project is to upgrade the capability of Changbogo-II to the level of Changbogo-III. And what is valuable is the score only, and we do not have the details, and we will respond accordingly if and when we have more information. And with regard to the capability enhancement, we are the supplier for the Changbogo-III project, and there is the prospect for the Changbogo-IV project. And we will continue to maintain the spirit edition with regard to the submarine, and we will continue to prepare for the upcoming Changbogo-IV project. The next question is from NH Investment Securities. I have a question about the order backlog from the offshore business unit. So can you give us the breakdown based upon the revenue amount? And additionally, you said that there was the one-off loss stemming from the valuation of the FX fluctuation worth around KRW 50 billion. Is it mostly from the commercial vessel BU or it is enterprise-wide? The answer is to respond to the second part of the question first, the FX-related loss is from the commercial vessel and also from the offshore business unit. In regard to the order backlog, based upon the contract amount, the order backlog, the total amount is about USD 30.3 billion. And as for the remaining revenue basis, we have about USD 20 billion worth of order backlog still remaining. The next question is from Merit Investment Securities. So the valuable data that we have is the Clarkson order book. And according to that information, it is likely that the revenue from the tanker will increase in the first half of next year. And I know that Hanwha Ocean have made a strategic decision to not take aggressively the new orders in 2023, but then the order volume has increased in 2024. So do you have any plan to actually expedite the volumes that -- for the orders that you have taken for the year 2024? The answer is that we do not have any plans to actually override the plan and initiate the production or the construction of the volume of all the orders that we have received in 2024. So we don't have any such plan as of yet. The next question is from Korea Investment Securities, and this question is to do with the MRO. There was a recent disclosure that you have been successful in winning the MRO project for the charge-through. And I'd like to understand, is there any other MRO projects that you're participating in the bidding as part of the U.S. 7th fleet? And additionally, what will be the timing for the USNS Yukon is leaving yard? The answer is, so you are already aware of our successful bidding for the MRO project for the charge-through. And of course, we are participating in the other proposals for the other MRO projects. Maybe we might not be successful in reaching the annual target of ship fixed vessels, but we continue to work towards this. And it is likely that there will be the additional MRO project that we will win until the end of this year throughout the remaining part of this year. And as for when the USNS Yukon will leave the yard, I know that there are still ongoing construction repair work. I will check the details and we'll get back to you with more information. And this concludes the Q&A for the 2025 second quarter earnings call for Hanwha Ocean. Thank you for listening.