Samsung Heavy Industries Announces Performance Bonuses After 12-Year Hiatus
Samsung Heavy Industries (SHI) is set to distribute performance bonuses for the first time in over a decade, marking a significant turnaround for the company. This decision comes as SHI has improved its financial performance by focusing on high-value ship contracts and moving away from low-priced orders. The Overall Performance Incentive (OPI) for this year has been established at 208% of the bonus base amount, which includes base salary and allowances. The bonuses will be disbursed on the 30th of this month.
The OPI is a key performance bonus program within the Samsung Group, typically awarded at the beginning of the following year based on annual results. Unlike Samsung Electronics, which limits bonuses to 50% of an employee’s annual salary, SHI’s calculation method allows for a more substantial payout based on the combined base salary and allowances. This year, not only SHI employees will benefit; in-house partner employees will also receive bonuses based on their years of service, with those having five or more years receiving the full 208%.
Financial Recovery and Future Prospects
This marks the first OPI payment since the shipbuilding downturn began in 2014, during which SHI faced significant operating and net losses. The company recorded an operating profit for the first time in eight years in 2023, although it still reported a net loss of 148 billion won, which prevented OPI payments in previous years. The OPI is calculated based on economic value added (EVA), which factors in corporate taxes and capital costs.
Last year, SHI returned to net profitability, but expenses related to contract cancellations due to the Russia-Ukraine conflict hindered bonus payments. However, the company has since improved its financial standing by increasing orders for high-value vessels, including liquefied natural gas (LNG) carriers and offshore projects. Financial analysts estimate SHI’s annual operating profit for last year at approximately 873.9 billion won, with net profit reaching around 666.6 billion won, indicating a significant recovery from the previous year.
The atmosphere within SHI has shifted positively, with employees expressing relief and optimism about the company’s future. Many employees had previously feared potential downsizing or a spin-off from the Samsung Group. Notably, Samsung Electronics Chairman Lee Jae-yong has not visited SHI since 2015, highlighting the company’s previous struggles.
Long-Term Outlook for Samsung Heavy Industries
Looking ahead, there is strong optimism that this year’s bonuses will not be an isolated event. SHI has successfully cleared most of its low-priced orders and currently holds an order backlog valued at approximately 41 trillion won, which secures more than three years of work. Industry experts believe that the combination of increased construction volume and rising ship prices will enhance the quality of earnings for SHI.
A shipbuilding industry official noted that the ongoing trend of performance improvement is expected to continue, driven by selective orders that command full pricing. With a robust order pipeline extending through 2028, Samsung Heavy Industries appears well-positioned for sustained growth and profitability in the coming years.
