Hyundai Heavy Industries Stock

[Interpreted] Good afternoon. Sung Gi-jong, Executive Director, overseeing Investor Relations for HD Hyundai Group. To make the session more efficient, we will keep the presentation short and leave more time for questions and answers. As we proceed English consecutive interpretation, we will also round up certain figures. After we wrap up the earnings presentation, I will briefly touch on the shipbuilding market conditions, and then we will move straight into the Q&A session.

Let me start with key takeaways from Q1, and then we will walk you through the operating results. First, on foreign exchange. The average exchange rate in Q2 was up KRW 36 versus the prior quarter, and that gave us the profit benefit of around KRW 30 billion quarter-over-quarter. Second, on steel prices, they were up slightly year-over-year, but roughly flat quarter-over-quarter. So there was little to no impact. And again, there were no one-off items this quarter.

Finally, our Q2 revenue mix by vessel type. HD Hyundai Heavy Industries; LNGC, 45%; LPGC and VLACs, 29%; container ships, 19%; and tankers, 6%. Turning to Samho, LNGCs 39%; container ships, 32%; tankers, 16%; LPGC and VLACs 10%, largely unchanged from the last quarter. Midsized vessels, containership share rose from 3% to 12%, while product carrier fell from 50% to 41%, and no other notable items.

Moving to Page 4, the consolidated results for HD KSOE. Consolidated revenue this quarter increased by 10% quarter-over-quarter and 20% year-over-year. This was mainly driven by stable vessel price increases and productivity improvements as well as a rise in the average exchange rates. Operating profit increased significantly, up 21% quarter-over-quarter and 73% year-over-year, and I will cover nonoperating items later in the presentation.

The table in Page 5 is for your reference, and let's move on to Page 6. Consolidated revenue in the Shipbuilding division increased by 11% quarter-over-quarter and 19% year-over-year, driven by higher vessel prices, increases in working days and production enhancements. And the Hyundai Heavy Industries basis, consolidated revenue in the Naval Ship segment increased by 6.8% quarter-over-quarter and 32.7% year-over-year. Offshore Plants, although the Ruya project is fully ramped up and revenue decreased by 18% quarter-over-quarter and 52% year-over-year as the Trion project is being ramped up. Next, Engine & Machinery revenue increased by 6% quarter-over-quarter, driven by price rise and favorable exchange rates, but decreased by 2% year-over-year.

Moving on to Page 7, operating profit by business segment. Shipbuilding operating profit increased by 26% quarter-over-quarter and 74% year-over-year, supported by vessel price rise and revenue increase. And operating profit margin recorded 18.8%, which is 2.2 percentage points up quarter-over-quarter and 5.9 percentage points up year-over-year. And despite higher revenue in the Naval Shipment division, it recorded operating profit that decreased by 48% quarter-over-quarter and 33% year-over-year due to a change in product mix. Offshore operating profit decreased by 31% quarter-over-quarter due to weaker revenue, but increased by 60% year-over-year and sustained positive figures. The Engine & Machinery division's operating profit kept up its rapid growth of 23% quarter-over-quarter and 34% year-over-year, supported by revenue growth alongside higher value vessel prices and a stronger exchange rate, and this was driven by the sales increase of HiMSEN engine and other onshore power plant engines.

Please refer to Page 8 for the operating results of consolidated subsidiaries, and I will go into more detail on Page 9. Let's start with HD KSOE on a stand-alone basis. Despite revenue growth in the [ EEP ] and Philippine shipyard, results were lower due to a decrease in dividend income. HD Hyundai Heavy Industries continued to deliver stable growth across its business divisions, including shipbuilding and engines, with revenue up 7% quarter-over-quarter and operating profit up 15% quarter-over-quarter as well. Next, Samho. Despite increased share of tanker revenue, the division continued its steady growth with an even greater improvement in profitability driven by productivity gains. Operating margin reached as high as 22.5%.

I will move on to Page 10, turning to Hyundai Marine Engine. Revenue and operating profit both fell 4% quarter-over-quarter due to several days of delay in delivering 2 completed engines. The revenue will be recognized in Q3, so there's nothing to be concerned about. Operating margin was 24.4% with profitability staying strong, thanks to a sharp rise in non-engine parts revenue. Hyundai Energy Solutions, on top of price increases, export volumes to the United States and Europe significantly increased, resulting in historical quarterly peak earnings with an operating profit margin of 21.9%.

On Page 11, nonoperating gains were mainly driven by foreign exchange gains from the higher USD-Korean won exchange rate, a KRW 53.9 billion gain from the Kunsan Shipyard sale and valuation gains on existing EVs, totaling approximately KRW 380 billion. Page 12, all 3 of our key subsidiaries are in net cash position. And on a consolidated basis, HD KSOE holds approximately KRW 12 trillion in net cash.

So that concludes our presentation of results for HD KSOE and subsidiaries. And next, we will walk you through the outlook for the Commercial Shipbuilding market.

[Interpreted] Good afternoon. I am [ Sung Hee-Hua ], Managing Director in charge of Commercial Rental and Gas Carrier sales at HD Hyundai Heavy Industries. I will now cover the global newbuilding market trends for the first half of 2026 and HD KSOE Shipbuilding division order intake in the first half of 2026. And first, market trends. In the first half of this year, the global newbuilding market -- in the global newbuilding market, we had active ordering happening also continued across major vessel types overall, including LNG carriers, LPG carriers, container ships and tankers, keeping global newbuilding demand at a high level. This is believed to be the result of favorable shipping market conditions combined with aging fleet replacement demand. Accordingly, global newbuilding order volume this year is also expected to remain at a high level.

Next, I will present our group's order intake for the first half of the year. Our Shipbuilding affiliates secured a total of [ $16.38 ] billion in orders during the first half of the year, achieving 96.2% of the annual order target. In particular, HD Hyundai Heavy Industries recorded outstanding performance, having already exceeded its full year target. In terms of order portfolio, we achieved strong results in high value-added gas carriers, including 38 VLGCs, 17 LNG carriers and 1 [ FSRU ]. We also secured a substantial number of orders in the tankers, including VLGCs, [indiscernible], medium-range tankers and long-range 2 tankers. In addition, we achieved order wins across a diverse range of vessel types, including container ships, PCTCs and liquefied CO2 carriers, maintaining a well-balanced order portfolio.

These results reflect our targeted marketing strategy. Our group has focused the sales capabilities on high value-added vessel types such as LNG carriers and VLACs while continuing order activities in the midsized vessel segment to secure a stable construction volume. We're also focused on enhancing profitability through improved vessel prices and contract terms.

And lastly, our market outlook. The second half market is expected to be influenced by geopolitical conditions in the Middle East and the broader global economic environment, and a degree of uncertainty may persist. And that said, we believe the medium- to long-term structural demand drivers, including tightening environmental regulations, the energy transition and a replacement demand remain intact. We will actively navigate the shifting market landscape while continuing our selective marketing strategies centered on high value-added vessel types and pursue a balanced approach to both quantitative and qualitative growth.

And this concludes our presentation of HD KSOE's 2026 first half results. Thank you for your attention.

[Foreign Language] So the first question will be provided by [indiscernible] of Korea Investment Securities.

[Interpreted] I have 2 questions. The first question is about your engine business. So 24.4% number in terms of profitability. Based on Q-o-Q performance, can you give us a rough breakdown between low-speed and mid-speed engines in terms of revenue for their proportion against the total revenue between low-speed and mid-speed engines? And also, given that ASP is projected to increase further, do you also expect any further improvement in profitability in your engine business?

And my second question is about your mid-speed engine for AI data center purposes. So there was an order intake in mid-April. And given that capacity could increase further, internally, do you have any discussions about its future growth trajectory? And while discussing this specific business, do you think of any specific inflection point for this business?

[Interpreted] To answer your first question about our engine business, so our engine business comprises big-sized engine, midsized engine and parts, so 3 segments. And the proportion of big-sized engines was 50% based on Q2 results, and that is down from 55% from the previous quarter. And midsized engine, that is up from 31% to 32% this quarter. And the rest, our parts business. And I believe our Onshore Plant engine business and its revenue may increase -- could increase further, and especially our HiMSEN engine and Onshore Plant engine and its proportion may increase further. And as you may know, this business can expect further growth in after 2028 forwards, then our performance improvement can quicken further, I believe.

[Interpreted] And to answer your second question, I'm from the Engine & Machinery division. And we have shared with you that our HiMSEN engine capacity is around 3 giga. And considering our order intake and our inquiries -- customers' inquiries about future intake, it's only natural that we increase our capacity further, and we're reviewing capacity expansion from multiple angles. And so this is basically the same answer that I gave you previously but with a bit of details included.

So there are 3 points that I'd like to make. The first point is, compared to other engine and machinery companies, I've talked about our superior and exceptional competitive edge. It is because we have an integrated production system. And if for any future plans, we're going to maintain this integrated production system along with the internalization of equipment and parts. The second point is, we have a phased-in plan for capacity expansion, although I cannot give you detailed numbers right now, considering market conditions and order intake, we may progressively expand our capacity. And currently, we have 3 giga capacity in Ulsan, and we have [ Sani ] engines capacity based in [indiscernible]. And we also think of new expansions, and we will make sure that any new expansions will be done in a way to maximize efficiency across all operations. So that is why we are focused on power generation purposes along with other purposes.

And the third point is we're facing a different supply chain structure and paradigm because our customers prefer high output engines today. That means we are focused on nurturing a different ecosystem, which is certainly different than before.

[Foreign Language] The next question will be provided by [indiscernible] of Shinhan Investment Securities.

[Interpreted] I have 2 questions. The first question is about operating profit of Samho. As you mentioned, it could be an influence of changing order mix can be one factor to consider, but still, the performance of Samho is better than we expected. So given price increases of vessels and changing product mix and productivity gains, do you believe based on current balance of back order, do you expect further improvement? Or what kind of guidance can you share with us? And you have been talking about productivity gains consistently over the last 1 and 2 years, a couple of years, is it that you are just tweaking out of -- just ringing already dry towel? Or are you pursuing new innovations and increasing your productivity?

My second question is about your SMR business. I'm curious about what's going on with your business with TerraPower. And overall, can you give us an update about your SMR business?

[Interpreted] About Samho's performance, yes, it's true they achieved stellar performance. And as to productivity improvement, we have our benchmark, which is our annual plan. So based on that, we give you our productivity enhancements and numbers. And based on the first half of this year, we had a productivity improvement of around 10 days or roughly 2 weeks, and that translated into 7% to 8% productivity improvement. There are varied reasons why, but it is a fact that productivity is improving. And about the second half performance of Samho, we need to wait and see. But in terms of volume-wise, if you look at Samho's performance, 2024 order accounts for 52% and 2025 order 14%. And relative to Hyundai Heavy Industries, the numbers are 31% for 2024 and 8% for 2025. So if the current proportion maintains, then we believe that the second half performance of Samho can improve further.

So if I share some updates about our business with TerraPower, Hyundai Heavy Industries, at the end of 2024, signed an agreement with TerraPower for its demonstration -- SMR demonstration project in the state of Wyoming of the United States. So Hyundai Heavy Industries is going to supply a cylindrical-type reactor for that project. And then among the component suppliers for that project as the first supplier, Hyundai Heavy Industries will be initiating production of key components at the end of 2026. In past May, we have already signed an MOU about the manufacturing and production of core components for the TerraPower project. And we were selected as the preferred bidder for the Natrium SMR device.

So we are currently consulting with the company, TerraPower, so between the Heavy Industries and TerraPower about the overall schedule and the project development for the commercial SMR development project. And unless our confidentiality agreement is not violated sooner or later, I hope I can share with you some more details about our collaboration with TerraPower.

Then our SMR business at the Hyundai Heavy Industries level, back in February of 2025 from ABS, our 105K SMR model that was -- that achieved AIP for the specific model. And then in June from the U.K.-based LI, we also achieved AIP for our PCTC for SMR applications. So we are currently working on both not just about SMR-propelled ships and vessels, we are also working on power plant purposes using SMR as well. And in May of 2025, we also achieved AIP for floating-type SMR devices. So we are exploring a variety of types and also devices for power plant purposes. So together with KSOE, we are currently exploring various marine applications using SMR. It means we are actively participating in international organizations efforts, including those involved in standard setting. That includes regulatory framework proposal.

[Foreign Language] The next question will be provided by [indiscernible] of Power Investment and Securities.

[Interpreted] Two questions basically. The first question about commercial ship market conditions. So VLGCs are known for its high margin performance, but I think it's very good recent days and compared to LNG vessels. Can you give us more update and details about VLGC's margin? I'm not expecting detailed figures, but still.

And the second question is about floating data center market. My question is basically about your level of readiness preparing for this market. Are there any customer inquiries about this? And if there are any, is it going to be about small-sized data centers that could be constructed within your dock? Or is it about building a larger sized platforms? And if there is any contract that is to be signed, are you capable of constructing these data centers right away?

[Interpreted] About your first question about the VLGC market, out of total 55 vessels ordered across the market, we have gained 38 of them. So truly, we are leading the market in this specific segment. And here, I'd like to point out that we were very proactive in our marketing strategy. We swiftly developed 90K new model compared to old Panamax model, and then we actively promoted this model. So we were -- in the first half of this year, our order intake amounted to 38 vessels. But as of now, actually, that's over 40. So we were able to land orders from major players. But unfortunately, we cannot share with you detailed numbers.

And we would be developing this segment within a boundary that will not be hurting the capacity of LNG carriers. And we have an optimized slot for VLGCs. So profitability for VLGCs would improve, we believe. And of course, increases in ton-mile and the ongoing war would certainly have an impact on this, but we expect an active VLGC market over the years ahead. So we will be focused on our ordering activities in the second half of this year with this in mind.

About your second question about floating data centers, we are closely consulting with numerous companies in this field in detail, and we are working hard to produce tangible performance. But due to nondisclosure agreement and confidentiality issues, we cannot disclose any further. And about your question about how FDCs can be constructed in detail and how such projects have been implemented. And thinking of onshore applications, there are variables, and there are important variables among them. So location could be one of them, and the size of data center can be also the one variable. So it could be very far sea, and it could be a place where the ground is quite solid, and we need to consider environmental factors as well. For example, the emergence of the occurrence of typhoons as well. There will be a variety of types, floating, fixed platform or semisubmersive.

At Hyundai Heavy Industries, we will be developing FDCs in a way that meets a variety of conditions. That that includes customer requirements and any other environmental requirements as well. And also, I think we need to pay more attention to the specific source of power as well when you look at the broader FDC market. In the short term, you may think of gas turbines, but that's not free from the bottleneck effect. And that's because the timely delivery of gas turbines is limited. So as a response to that, now companies are now eyeing towards Marine engine and similar devices now. But if you look at the requirements of big tech companies, they are seeking carbon-free and decarbonize the data center operations. So that's one of the key priorities that we need to consider.

So we will be keeping an eye on market leads and market demand as well. And over the mid- to long term, whether it is SMR or onshore power development, in developing data centers, we would be developing both technology and our business, taking account of all these factors.

[Foreign Language] The next question will be from Han Young Soo of Samsung Securities.

[Interpreted] Two questions overall. The first question is, I'd like to know the proportion of hedging between Hyundai Heavy Industries and Samho. Can you give us detailed numbers? And the second question is, in your offshore business relative to revenue, operating profit is better than revenue, so is it a sustainable structure? I think it's attributable to the other category and consolidated adjustment category. So I wonder whether it is because of good performance of projects themselves? Or is it because of other factors?

[Interpreted] For the hedging policy [indiscernible] Industries and Samho, these 2 companies apply the same identical hedging policy. At the time of order intake, the ceiling is set at 60%, but considering any subsequent developments, additional 15% is also allowable, so it up to 75% in principle. But considering current exchange situation, this ceiling could be exceeded. So currently, both 2 companies, [indiscernible] Industries and Samho, their hedging portion is slightly over 75%.

And about the sustainability of operating profit in our Offshore business, as was the case in Q1, in Q2, we had solid operating profit performance. And it is basically we have a targeted strategy to focus on profitability. The good cases in point include the Trion project and the Ruya projects. These are the ones that we landed orders for with profitability in mind. And for -- and also internally, we are developing our internal capabilities for our Offshore Plant business. And also at the execution side, we are committed to reducing costs as well. So that is why our operating profit performance was solid, and this is despite the fact that we have current issues that we need to deal with as to our Onshore Plant business.

So as to the sustainability question, and in fact, we need to land more orders. That's the situation we're facing. As I told you in the first quarter earnings presentation, we are closely working with our customers across the Middle East, the United States and Australia, and that includes major oil companies and orders placed by NOCs, major NOCs. But in the Middle East, the valuation process itself is being delayed because of the geopolitical tension. And in some projects, we were not awarded the order, but we keep trying, and we are committed to landing orders across those regions.

And if I make additional comments based on the backlog, then if the revenue is KRW 1.2 trillion, it is possible to turn around and generate profit, not suffering losses. So in the second half, in case the things do not go well as we plan, then we will input and invest vessels this business so that we can -- so that the fixed cost expenses can be recovered. And this is how we're going to make sure that the position can be maintained within this specific business.

[Foreign Language] The next question will be from [indiscernible] of NH Investment & Securities.

[Interpreted] I have 2 questions about your commercial ship order intake. The first question is what is going to be your order intake strategy in the second half of the year? Because you already have reached almost your full year target. Then what's going to be your priority? It's going to be increasing ASPs, or is it going to be still securing a backlog by opening slots? And also your strategy may differ by vessel type as well. So can you share with us your order strategy?

And the second question is across the global market. In the first half, the orders were so many very active. It means maybe in the second half of the year, the order momentum may decline. So what's your view on that?

[Interpreted] About the commercial ship business, as you mentioned, we have already almost reached our full year target. If you look at our backlog, it's more than 500 vessels already translated into 3.5 years of backlog. And so up until 2029 and 2030, our sales strategy would be focused on, I think, would be gas vessels. And of course, we need to look at the market situation in the second half of this year, but our priority is the highest revenue and the highest operating profit per unit slot. It means we will be focusing on high value-added vessels, and that means gas vessels.

Of course, because of product portfolio maintenance, we will not be losing sight of tankers, but it will be primarily LNG and LPG vessels that we will be focusing on. And if you look at the order activity globally in the second half of this year, it's 1,473 vessels, and that's almost 100 million CGT. According to Clarkson's, it's going to be 115 million CGT this year. It means we're going to be seeing a very bullish market for the 3 consecutive years, surpassing 100 million CGT. And even until 2027, we see -- we believe this market will expand and continue into 2028 and 2029. And here, LNG vessels play a key role.

So again, high value-added vessels, the LNG vessels, and some project that going to 2029 and 2030, we're going to be having a shortage of LNG vessels as well. If you look at 55 LNG vessels ordered this year and 30 of them clearly evidently demonstrates that as a shipbuilder, we can have expectations about the market going even bullish and active.

[Foreign Language] The next question will be from [indiscernible] of [indiscernible] Securities.

[Interpreted] My question is about your special naval ship business. In the second half of this year, can you share with us an update about your unmanned surface ship project with the United States government? Anything -- any specific time point that you can share with us about this specific project? And also secondly, can you share with us any information about RFI that was received from the U.S. side?

And also, there are projects across the U.S., Saudi Arabia, Peru and the Philippines that were mentioned about your special ship and naval ship business in 2026 and 2027. Can you please share with us any specific time point where we can have visibility about your orders and contracts?

[Interpreted] So if I answer your questions about the surface ship, we are jointly developing a pilot product with Anduril. And as to this NSV, first of all, there needs to be a demonstration, then a concrete order would follow, which we expect to be coming after 2027. And currently, we have notified companies who may participate in that demonstration and Anduril is not one of those companies, but we are moving quicker and faster than any other companies in manufacturing a pilot product. So there will be an opportunity once demonstration is achieved.

Secondly, as to the RFI that we received from the U.S. Department of Defense, and due to security and confidentiality issues, we cannot mention in detail, but it's going to be about destroyer or certain types of support ships. And within the RFI, there were requirements, and then we timely provided our information responding to the RFI. That includes price information, our construction capacity and delivery capacity as well. And I think maybe that RFI aims to gather basic information so that the U.S. government can finalize its budget so that the government may review the possibility of Korean companies participating in its naval ship construction. We will share with you updates as soon as we see any tangible and visible information.

And as to other projects, in 2026, we're working on the follow-up project in the Philippines as well as the submarine project in Peru. And maybe in Q3 and Q4 this year, we expect to share with you more detailed information. About Saudi Arabia, we do have delays in projects going on within the region, possibly because of the war. And for other regions, Southeast Asia, Latin America or Europe, we will, again, share with you any updated information. But aside from these naval vessels, we are also working on icebreakers, as you have seen from our business with Sweden, and as well as other special purpose vessels as well. We're making our preparations. We're developing models and promoting our models, not just for naval ships, but these other special-purpose vehicles.

[Interpreted] Thank you for your participation.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

[Interpreted] Good afternoon. We would like to thank you for your participation today, and we would like to begin the Q1 2026 earnings presentation of HD Hyundai Group. As for this conference call, there's going to be a presentation -- earnings presentation and then followed by a Q&A session.

Let us begin HD KSOE's earnings presentation.

[Interpreted] Good afternoon. I am Gi-jong Sung, Executive Director, overseeing Investor Relations for HD Hyundai Group. First of all, apologies for some disruptions, and let us begin.

Now let us begin the Q1 2026 earnings presentation. And please note that Q1 results reflect the consolidated financials of HHI following the merger with Mipo completed last December.

And with that, I'd like to begin, and I will first cover Q1 key highlights and followed by operating performance. But before that, we would like to examine key highlights. And after the earnings presentation, we will walk you through the market outlook for shipbuilding and offshore plant.

We also have attendees from Engine segment and 2 guests from the Engine segment. So if you have any related questions, we will be happy to answer them during the Q&A session. First of all, regarding the impact of exchange rates.

The quarter end exchange rate was KRW 1,513 per USD, up KRW 79 from the previous quarter, while the average rate increased by KRW 15. As a result, the earnings improvement attributable to foreign exchange movements was minimal, approximately KRW 10 billion in total.

And second, steel plate prices saw only a marginal increase in Q1, resulting in an equally limited impact on earnings. And third, there were no one-off items this quarter, very clean. And performance bonuses, both internal and external, and these bonuses have been allocated in a quarterly basis in line with the estimated annual profit.

And finally, I will share revenue breakdown by major vessel type for Q1. So we would like to give you some updates. HHI, LNG carriers, 43.9% decrease. LPG carriers and VLACs, 33.5% increase. container ships, 15% increase; and tankers, 6.5% increase.

So LNG carriers declined, but others all increased. Now somehow, LNG carriers, 40.1% increased again. Container ships, 31.2%, stable; Tankers, 14.3% decrease. LPG carriers and VLAECs, 10.8%, slight increase. For midsized vessels, the proportion of gas carriers has increased. And for LNG bunker vessels, bunker vessels that many of you have been asking about, one unit has now begun to be recognized in results.

Let us now turn to Page 4, where I will walk you through Q1 consolidated results for KSOE. Consolidated revenue for Q1 decreased 0.1% quarter-over-quarter, while increasing 20.2% year-over-year. This was driven by a modest increase in the average exchange rate and higher vessel prices, a shift in vessel time mix and continued productivity improvements despite fewer working days compared to the previous quarter.

Now operating profit grew significantly, up 30.6% quarter-over-quarter and 57.8% year-over-year. Due to the merger with Mipo, I think these stellar achievements were possible. Now performance bonuses and related costs, which are higher than last year, have been allocated and reflected on a quarterly basis.

Now this quarter demonstrates a very stable and consistent improvement in earnings with no one-off items. I will address nonoperating items later in the presentation. For consolidated results by major business segment on Page 5, please refer to the table provided. Let's move on to Page 6. I will begin with consolidated revenue for the Shipbuilding segment. Although this is a seasonally affected quarter, stable revenue growth has continued for several reasons I outlined earlier in the overall revenue discussion. The revenue decreased to 0.6% quarter-over-quarter while increasing 14.6% year-over-year.

In the Naval vessel segment, a shift in mix and a rebound in the export proportion drove revenue to KRW 281.8 billion, representing a 67.6% increase year-over-year. On a quarter-over-quarter basis, revenue declined 19.5%, largely due to seasonal factors. Turning to offshore plant. Despite fewer working days, the full ramp-up of the Trion FPU and Ruya projects drove a substantial 184% year-over-year increase in revenue. However, revenue declined 17.3% quarter-over-quarter as the previous quarter had benefited from Shenandoah change order recognition. So that should be taken into consideration. For engine and Machinery, despite seasonal headwinds and higher proportion of dual fuel engines and an increase in selling prices drove growth of 14.7% quarter-over-quarter and 7.5% year-over-year.

Let us now move to Page 7, operating profit by business segment. Shipbuilding segment. Operating profit increased 28.8% quarter-over-quarter and 42.1% year-over-year, driven by improvements in vessel time mix and productivity. Operating profit margin stood at 16.6%, up 3.8 percentage points from the previous quarter and 3.2 percentage points year-over-year, reflecting strong profit growth momentum. In the Offshore segment, Operating profit surged 1,212% year-over-year, in line with the significant revenue increase. On a quarter-over-quarter basis, however, operating profit declined 10% as the prior quarter had included the benefit of Shenandoah change order impact. Now Engine and Machinery, operating profit grew 23.9% quarter-over-quarter and 41.3% year-over-year.

This was driven by revenue growth alongside a higher proportion of dual fuel engines as previously discussed. DF engine ratio increased significantly from the prior quarter, reaching 73% for 2-stroke engines and 79% for 4-stroke engines. And operating profit in the naval vessels segment was KRW 34.3 billion, a substantial increase of 52.4% quarter-over-quarter and 34% year-over-year. This reflects the shift in vessel mix and the increased proportion of export orders as explained in the revenue section. I would like to reiterate that the naval vessels segment may be subject to significant earnings fluctuations on a quarterly basis.

And please refer to the operating results table for consolidated subsidiaries on Page 8, and I will provide further details on Page 9. First of all, KSOE and a stand-alone basis. KSOE saw a larger improvement in earnings driven by revenue growth in the SD division and an increase in dividend income from subsidiaries. At Hyundai Heavy Industries, revenue increased 13.9% quarter-over-quarter, driven by a high exchange rate, rising vessel prices and improved vessel type mix and the consolidation of Mipo following the merger. Operating profit expanded 57.5% quarter-over-quarter, reflecting both revenue growth across all business divisions and meaningful improvements in profitability.

So this demonstrates a consistent improvement in profitability on a sequential quarterly basis. Beyond shipbuilding, clear signs of revenue growth and profitability improvement are also evident in the Engine and Offshore plant segments. Now Hyundai Samho Heavy Industries, despite booking the highest level of performance bonuses, both revenue and operating profit increased quarter-over-quarter, supported by rising vessel prices and an improved vessel type mix. The operating profit margin for Q1 stood at 18.6%, so far better performance than Q4 last year.

Let us now turn to Page 10. Now Hyundai Marine Engine, despite seasonal headwinds, the company delivered revenue growth of 20.3% quarter-over-quarter with operating profit increasing 16.8% over the same period. And this was attributable to a higher ASP for engines and an increase in production volume alongside concurrent growth in the parts business. And what's notable is that both utilization rate and production efficiency continue to improve simultaneously, and this has ultimately translated into a substantial improvement in profitability. The operating profit margin is 24.4%. And next, [ Hyundai ] Energy Solutions, whose results were already disclosed last week. While revenue grew 4.7% quarter-over-quarter, operating profit surged by as much as 100%. So year-over-year comparison will be effective, I think. Sales volumes increased both domestically and internationally and profitability improved significantly through selling price increases. In particular, a substantial expansion in the domestic market sustains sequential revenue growth despite being in the off-season.

Page 11, which covers nonoperating income and expenses. The rise in the Korean won, U.S. dollar quarter end exchange rate generated FX-related gains, and there are no other significant items to highlight. Please refer to the slides for the remaining details. Now Page 12, key financial ratios. So all 3 major subsidiaries maintain a net cash position. And on a consolidated basis, KSOE holds approximately KRW 8.7 trillion in net cash. And this reflects an exceptionally solid financial structure. So this concludes the Q1 2026 earnings presentation covering the consolidated results of KSOE and its subsidiaries.

Now let us move on to commercial vessels and offshore plant.

Good afternoon. I am [indiscernible], Executive Director of Strategic Sales at KSOE. I will now present an overview of the global newbuilding market trends in Q1 2026, along with KSOE's shipbuilding order target for 2026 and our Q1 order performance. So first of all, global newbuilding market. The newbuilding market in Q1 maintained solid momentum led by tanker orders, -- and according to Clarksons, global newbuilding orders in Q1 reached 36.9 million [ GT ], representing an increase of more than 67% compared to 22.11 million [ GT ] in the same period of the prior year.

This growth was driven by favorable freight rates for tankers and robust replacement demand for aging vessels alongside continued ordering activity in LNG carriers, LPG carriers and container ships. In summary, contrary to concerns that ordering volumes might moderate this year due to the weight of high order intakes in recent years, the newbuilding market is performing better than expected. In line with this trend, Clarksons released its updated forecast at end of March, projecting full year 2026 newbuilding orders at 115.7 million GT, a level broadly comparable to last year's 120 million GET approximately. For reference, Clarkson had previously forecasted 2026 ordering volume at 90 million GT in the second half of last year, so 3 consecutive years over 100 million GT. Now our order target for this year. At the start of the year, we had concerns over a global economic slowdown, geopolitical risks and the possibility of entering a down cycle following several years of elevated ordering activity.

At the same time, we determined that it was necessary to proactively secure order volume in response to the current unpredictable and uncertain market conditions and set a more ambitious order target compared to the prior year. And this year, HD Group's shipbuilding new order target is in total $170 billion. Breakdown by subsidiary, HD Hyundai Heavy Industries, $11.47 billion; and HD Samho, $4.9 billion; and KSOE, $0.66 billion. I will now discuss our Q1 order performance. Our group's shipbuilding subsidiary secured a combined total of $6.39 in orders during Q1, achieving 37.5% of the full year target by subsidiary, Hyundai Heavy Industries, $4.896 billion; Samho, $1.045 billion; and KSOE $0.45 billion. The order intake by vessel type is as follows: HD Hyundai Heavy Industries secured a total of 45 vessels, 9 LNG carriers, 4 large container ships, 2 Suezmax tankers and 16 feeder container ships, 10 MR tankers, 2 LR2 tankers and 2 LCO2 carriers. so 45 vessels and Samho, 5 Suezmax tankers, VLGC, 3 VLGCs, 1 LNG, 39 and KSOE 6 LR2 tankers through its Philippine yard, bringing the group's total order intake to 60 vessels.

In the first half of this year, amid a market environment in which Chinese shipyards focused on expanding their order volumes primarily in tankers and bulkers, we maintained a selective ordering strategy centered on vessel types where we hold a competitive advantage rather than engaging in direct volume competition. As a result, by focusing on high-value vessel types, LNG carriers, VLGCs and container ships rather than tankers, we were able to secure order volume while also improving profitability. Regarding newbuilding prices, shipyards across the industry have secured sufficient order backlogs and current newbuilding prices remain firmly supported at elevated levels. So we're making every effort to achieve qualitative improvements in terms of pricing and contract conditions underpinned by our strong backlog position.

I will now turn to the market outlook and our strategic response going forward. While geopolitical risks, including the protracted conflict in the Middle East and concerns over a slowdown in global economic growth continue to persist, current shipping market conditions are, in fact, showing favorable momentum, supported by short-term freight rate premiums stemming from uncertainty. Vessel ordering demand driven by new energy demand also remains robust, including the full-scale resumption of LNG projects centered on the United States. However, if the conflict in the Middle East were to be prolonged, geopolitical uncertainty could potentially lead to a reduction in energy demand and an economic downturn, which in turn may give rise to differentiated patterns in ordering timing and investment decision-making across vessel types and shipowners.

Accordingly, we will continue to closely monitor these risk factors while pursuing strategic order activities to capitalize on market opportunities in a timely manner, taking into account the supply-demand dynamics and the competitive landscape for each vessel type. While market volatility is increasing, medium- to long-term structural demand drivers, including tightening environmental regulations, accelerating energy transition and replacement demand for aging fleets remain firmly in place and expected to continue underpinning ordering for our core vessel types. In alignment with this market environment, we will pursue a balanced approach to both quantitative and qualitative growth, leveraging our technological competitiveness and accumulated commercial capabilities. So this concludes our presentation on KSOE's Q1 2026 performance. Thank you.

Good afternoon. I am [indiscernible], Senior Manager of the Offshore Division.

I'd like to briefly present our Q1 offshore business performance and market conditions. We're actively participating in upcoming offshore construction tenders across various regions, including the Mediterranean, Australia and the Middle East. Middle East projects, in particular, expected to proceed through contractor selection and final contract from late Q2 through Q3. In our offshore wind power business, a key renewable energy segment, we're strengthening technical capabilities based on our proprietary in-house models while actively pursuing expanded project participation domestically and internationally. In the offshore substation segment, leveraging competitiveness built through our proprietary high [ OSS ] model, we achieved tangible results by signing early works contracts from multiple domestic offshore [indiscernible] projects. Detailed engineering is currently underway and following [ EPC ] contract process, we anticipate this year will mark a remarkable year of offshore wind construction and fabrication.

In the [ floating ] Structure segment, we continue to technical -- continue with technical consultations and collaboration discussions with multiple developers based on our proprietary high-float model. As commercialization of floating offshore wind has been delayed relative to initial expectations, we are striving to secure opportunities, not only in the government-led domestic demonstration test bed, but also in small-scale overseas demonstration projects. I will now briefly address our market outlook. And with TerraPower of the United States, we're currently undertaking a demonstration project. After the signing of the contract last October, we are about to begin construction. Based on our close partnership with TerraPower, we will engage in joint -- we are engaging in joint development and research for the commercialization of [ SMI ]. So we would be expanding further business opportunities in this.

Now market outlook briefly. In Q1 2026, international oil prices surged sharply alongside a significant widening of price volatility driven by heightened geopolitical risks stemming from the conflict between the U.S., Israel and Iran in the Middle East. That said, as oil prices remain at levels that underpin profitability and energy security continues to be emphasized across nations, oil and gas field development by major producing countries is expected to persist. And accordingly, stable order flows for offshore plant facilities are set to continue across various regions. In the offshore wind power sector, it is true that some developers have begun pacing themselves in response to policy shifts and rising development costs.

However, continuous investment and supply growth are expected to continue over the medium to long term. In the domestic market, in particular, the enforcement of the special act on the promotion of offshore wind power deployment and industry development on March 26 has further heightened expectations for the revitalization of the offshore wind market. Against this market backdrop, we're pursuing a balanced approach across our offshore, offshore wind and SMI businesses, continuing our sales activities with a strategy of selectivity and focus in order to secure our projects that ensure profitability and remain within a well-managed risk profile. So with this, I'd like to conclude my remarks on the Q1 Offshore Energy business performance and market conditions. Thank you very much.

[Operator Instructions]

[Interpreted]

And this quarter, yes, we had a very good performance. If no orders that we land this year, then the revenue overall in this segment may go down coming into 2027.

The following question will be presented by [indiscernible] from Meritz Securities.

[Interpreted] My question is about the detailed performance. So first of all, can you elaborate on your revenue performance for your SD business? And it seems like your company is engaging in a range of new business opportunities, including India. And how are you going to utilize [indiscernible] reflected in Q2 as a cost as an expense.

[Interpreted]

As to the fire incident, you mentioned, we're still investigating remediation or recovery plans have been developed yet. So as you said, within this immediate quarter, this fire incident will not be reflected in our performance. For our SD business operating profit was KRW 11.4 billion.

[Interpreted] The follow-up question will be provided by Han Young Soo from Samsung Securities.

[Interpreted]

It's is about the business model of your overseas subsidiaries. And you do have a business operations in the Philippines, but I don't think the Philippines is a country recognized for its shipbuilding industry in terms of name value. So previously, Mipo won orders, then it will give these orders to a subsidiary in Vietnam. That's how business was operated. So is it going to be a case that the same applies to your Philippine operations? For example, HHI who -- operated?

[Interpreted]

If I answer your first question as to our midsized vessel business, it was previously in Mipo. There won't be big differences between Hyundai Heavy Industries and our midsized vessel operations in terms of profitability.

And thank you for your question. Your understanding about our operating model covering our overseas shipyards would be correct. So leveraging our technological prowess and brand value at the headquarter level in Korea. We're getting positive feedback and evaluations. And in the Philippines, again, we're leveraging our capabilities at the headquarters in Korea and lending orders from overseas. And when we further expand our global footprint, this approach would apply as well. So using our headquarter capabilities and broadening our global presence.

Further clarification, when you say , not on heavy industry KSOE.

[Interpreted] The following question will be provided by [indiscernible] from NH Investment & Securities.

[Interpreted]

Then what is your internal view about the need for capacity expansion? That's my first question. And my second question is, it seems like Engine business is focused on those companies holding licenses. And given shortages which are happening currently and given market expansion opportunities, is it going to be a focus on those license owning companies or other companies as well?

[Interpreted]

If I answer your first question, and mentioning our HiMSEN engine capacity is 4 million horsepower and 3 gigawatts. So given our current capacity, we're recording a quite a high utilization rate and to keep up with our recurring capacity, especially for generation purposes. And -- but we still need to supply our product our Hyundai -- and there is a surge in demand for data center applications as well. So we're reviewing possible feasible options from [indiscernible] perspective. So based on the order and demand our capacity expansion plan will be aligned with future demand orders.

Given the current order winning trends -- do not 100% sure about whether licensee engines are also responding to data center demand. But given cost competitive edge, there are license fees to be considered, which means existing licensor companies have a dominant position in terms of cost competitive edge. So in that sense, our company is also better positioned than others in this market.

About capacity expansion were under review, but this subject is for disclosure. So when detailed plans are confirmed, we can give you further information.

[Interpreted]

The following question will be provided by DongHeon Lee from Shinhan Investment & Securities.

[Interpreted]

I have 2 questions about your Engine business. First of all, I know that if you are to expand your capacity, of course, you need to make disclosure -- how difficult would that be? That's my first question. And also according to your disclosure, your supply plan is scheduled through 2030. And I'm asking this question because I'm wondering whether you can further speed up the overall plan so that you can supply your product earlier than 2030?

My second question is this very market is just opening. So as an analyst, we're not fully grasping this market development. So what's the atmosphere data center contract, and I'm wondering whether you can elaborate on this very contract with -- for instance, the amount of megawatts to be installed and whether it's going to be for power generation and other aligned matters about this very contract.

[Interpreted]

A very well-established supply chain in Korea, and we have an integrated production system, which is one of our strengths. And also, we have internalized the necessary equipment and pipes as well. So if we are to expand our capacity, and you can think of 2 pillars, assembly plant and piping equipment. In terms of the assembly factory, it won't be that much difficult to expand our capacity in terms of assembly plant operations. And as to the equipment as well because we have a very well-established supply chain.

Before I answer your second question, this data center market is certainly growing and it highlights the need for more power and electricity. So we continue to see relevant needs and demands and expectations from our clients. But still, we have an issue with -- in installations. And about the contract with the 2030 set as a delivery year, our customer also has a power plant construction schedule. And in alignment with the various schedules, we will be also splitting our supplies in 2028, '29, and in '30. So it is aligned in that way. As to the detailed specifications of this construction, it's going to be 660 megawatts.

And so -- there's going to be 11 installations across the 3 different sites. And the scope of this contract will be engine power generation, relevant control, installation and necessary audit as well. But for details about this contract, we have already publicly available data. And because of customer requirements from the United States, we have certifications to achieve, including UL certification.

[Interpreted] The following question will be provided by [indiscernible] from Meritz Securities.

[Interpreted]

Auto investment plans targeting India. As you know, President [indiscernible] toured around India in the last month and it seems like that investing in India is being encouraged. So I wonder if there is any commitment to, for example, ordering how many commercial vessels from the Indian side over the next few years. Even though it will be feasible for you to give us any official information at least. Can you let us know that you were going in the right direction -- and recently, that competitor is really advancing into this specific area. And it seems like your company can also think of Offshore or Engine & Machinery business opportunities. For instance, capturing EPC and turnkey business opportunities in this sector. Can you give us any update on this?

[Interpreted]

Visited India, our Group Chairman also accompanied him and met key figures, key opinion leaders in India. And we are pretty sure that there's going to be support from India in building a greenfield shipyard in this country. So internally, we're currently engaging in a feasibility study about establishing a greenfield shipyard in the country, so there's going to be support from India as well. But there is no concrete and detailed commitment about how much commercial vessel -- greenfield shipbuilders to be shipyards to be established is going to be meeting the domestic internal demand of India across multiple vessel types.

If I answer your question about floating data centers, I believe that we are sufficiently equipped to enter this market, both in terms of technology capabilities and engineering capabilities as well -- for operating those power ships. So we're sure that we have competitive edge over our competitor in this sense. And as was mentioned in the press earnings call of Hyundai Marine Solutions, there could be a variety of ways that we can present to our customers, including new builds and retrofit. And in this is still in its nascent stage, what we believe we can witness growth over the medium to long term in this market.

[Interpreted] The following question will be provided by [indiscernible] from [ IM Securities ].

[Interpreted]

So you have an engine business on Hyundai Heavy Industries, but -- and also you have Hyundai Marine Engine and Hyundai Marine Engines, our profitability is remaining rather flat, around 25%. So based on profitability, is it correct or safe to say that Hyundai Heavy Industries engine operations would be having around 29% profitability?

And -- the Hyundai Marine Engines, OPM, operating profit margin is around 25%, and this is quite high already and Hyundai Marine Engines utilization rate is lower compared to Hyundai Heavy Industries engine operations. So with further price increases and favorable -- Okay, from the Hyundai Heavy Industries Engine business the proportion of dual-fuel engines is increasing. So in both operations, Hyundai Marine Engine and Hyundai Heavy Industries with engine prices increasing and if FX rates are favorable, then we can surely expect further improvement in profitability.

The engine for data center applications and the revenue would be recognized from 2028 onwards. And if you consider that, there can be a further boost to the profitability of our engine business.

[Interpreted]

The last question will be provided by Young Soo Han from Samsung Securities.

[Interpreted]

Two final questions. The first question is about your Offshore business. You mentioned that if you do not land any further orders this year, then the revenue may decline starting from next year. And the projects that you mentioned are all taking place in the Middle Eastern region. So are there any risks of those projects being delayed -- my second question is about your special vessel business. So in the short term, can you mention any projects that we can put our expectation on in the short term?

[Interpreted]

The tenders that we're currently participating, they are spread across the UAE, Saudi Arabia, Kuwait and other countries, and it normally takes 3 to 6 months or even more. If you look at Offshore construction tenders. So because of the war in Iran, maybe slightly, there could be slight delays. But we have already submitted our prices and bids in Q1 already. So the overall process is going on as usual and we're closely contacting -- our significant delays in this sense.

Thailand because we have submitted our proposal in April for the frigate project in the country and elsewhere in the Philippines, we also -- we will be participating in next-generation frigate project in the Philippines as well as multipurpose support vessel in Malaysia. So across Southeastern countries, bidding process is ongoing. And so we will be sharing news about these potential projects. We cannot mention any specific country name, but across continents, we're working across -- so as you know, our business presence spans a variety of areas, shipbuilding -- complex and disrupted. I believe our business will be -- would emerge even stronger and we would be even busier amid such uncertain market conditions. With this, we would like to conclude our Q1 2026 earnings presentation. Thank you very much.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

First of all, we're going to have a presentation and then a Q&A session that will follow. Let us begin.

[Interpreted] Thank you. I'd like to welcome all analysts today. Good afternoon. This is Gi-jong Sung from KSOE, Investor Relations. Thank you for joining our Q4 2025 earnings call.

So we will begin with a brief overview, just like before, of the key highlights of our Q4 results, followed by a review of operating performance. We will then discuss the shipbuilding and offshore plan market environment and then conclude with a Q&A session.

First, currency impact. The quarter end, Korean USD 1 exchange rate in Q4 was KRW 1,435, up KRW 33 quarter-over-quarter, while the average exchange rate increased by KRW 64. This resulted in a positive operating profit impact of approximately KRW 50 million, including around KRW 30 billion at merged HHI and KRW 20 billion at Samho. Second, modest increase in steel prices had a limited impact on earnings in Q4. The only minimal impact.

And third, one-off gain. The significant improvement in full year performance resulted in additional internal and external incentive bonuses, which have been reflected in the operating profit of each business division and I will discuss this later on in my presentation. So again, with separate recognition in business division, so far operating profit slightly inched down. Due to our internal circumstances, we cannot disclose exact bonus incentive numbers. And second, the Offshore division reflected KRW 47.1 of change order as a profit. And Samho does not have any specific one-off issue for the fourth quarter of last year. And as you are aware, due to the merger, 1 month of HMD results for December was consolidated into the merged Hyundai Heavy Industries entity. That's for your information.

And in addition, let us share the breakdown of Q4 top line by order year for each shipbuilding subsidiary. HHI, LNGC, 48.4%, slightly down quarter-over-quarter. LPGC and BLAC, 32.2%, slightly up. And CMTI, 12.3%, slightly down. And tanker 5.4%, up from the previous year. Now Samho LNGC, 37.1%, slightly down. Container shipped 31.5%, slightly down. The tanker 17%, slightly up. And LPGC and BLAC, 10.2%, up from the previous quarter.

Now, Mipo, for the last time because we won't be mentioning Mipo. PC, 59.5%, slightly down. And LPGC, 24.2%, slightly up. Others slightly up with 14.8% and LNG bunkering vessel construction is initiated this quarter, partially reflected in our sales. As a result, so that were -- these were the key highlights.

And then on Page 4, I will move on to Page 4 and elaborate more on KSOEs Q4 2025 earnings. But I would like to note, first of all, that as the Chuseok holiday fell in the fourth quarter last year, there was only one additional working day in the fourth quarter of 2025. So this is one thing that I'd like to take note of. But in sales increased by 7.5% quarter-over-quarter and by 13.8% over year-over-year. And despite the increase in the average Korean won in U.S. dollar exchange rate and minimal differences in the number of working days, productivity continued to improve and operating profit decreased by 1.5% quarter-over-quarter, but increased by 108% year-over-year, mainly due to one-off factors such as incentive bonuses. So excluding these one-off items, profitability continues to improve steadily and remains in a stable trajectory. And on a quarterly basis, again, we continue to have profitability improvement in a very stable level.

Now Page 5. Earnings by business division, and please refer to the table below, and let's turn to Page 6. The first, on the Shipbuilding division. Despite no seasonal factors, as I said before, higher average exchange rates, rising vessel prices and productivity improvements continued while Naval Ship revenue declined due to vessel mix changes. So overall, revenue declined slightly.

And next, Offshore plant. The number of working days remained unchanged, while revenue increased sharply, driven by the full-scale execution of the Trion FPU and Ruya projects, rising 97.5% quarter-over-quarter and 17.5% year-over-year. In the Engine and Machinery division, revenue declined by 24.1% quarter-over-quarter due to the partial deferral of deliveries into January, but increased by 16.4% year-over-year. So due to the deferral, in Engine and Machinery division, we're going to see improvements in the second quarter.

Now Page 7. Operating profit by business division. In the Shipbuilding division, profitability improved on higher average exchange rates, rising vessel prices and productivity gains. But quarter-over-quarter operating profit declined by 0.4% due to incentive bonuses and one-off base effects. While year-over-year operating profit increased by 79.3%, that's on an annual basis. And OP margin was 13.7%, down by 0.3% quarter-over-quarter, but it would have been higher when one-off items were excluded.

The overall profitability continues to improve. So once again, my apologies for not being able to disclose exact numbers. Now in the Offshore division, the Offshore division delivered strong earnings growth, and this is as a result of strong revenue growth and change order. For the Engine division, operating profit decreased by 33.1% quarter-over-quarter and 58.2% year-over-year due to the revenue decline and reflection of incentive bonuses. And regarding the dual fuel engine mix, the dual fuel proportion remained stable, accounting for 72% of 2-stroke engines and 78% of 4-stroke engines broadly in line with previous quarters.

So DF engines accounted for almost 80%. And then Naval Vessel division, even though data is not available on the slide, in Q4, revenue amounted to KRW 349.9 billion, down by 5.8% quarter-over-quarter mainly due to a change in naval vessel mix and a lower export share. And in 2026, but we believe that revenue would recover because we have increases in backlog. Operating profit was KRW 22.5 billion, down by 56% quarter-over-quarter, reflecting lower revenue and a high base effect from the KRW 15.8 billion of one-off gains recognized in the previous quarter. And in Special Naval Ship division, the bonuses were reflected. And please be aware that the Naval Vessel division's margin trajectory will show ups and downs on a quarterly basis, depending on the payment terms of each project. But on an annualized basis, this division continues to grow.

Now Page 8. Please refer to the earnings result of each consolidated subsidiary, and I will elaborate on them more on the next page.

First of all, KSOE. KSOE stand-alone operating profit was lower due to the absence of dividend income from its subsidiaries. And HHI recorded 17.5% quarter-over-quarter revenue growth, reflecting the positive foreign exchange rates, higher vessel prices and consolidation of 1 month revenue of HMD. And despite reflecting the incentive bonuses, OP increased by 3.2% quarter-over-quarter due to revenue growth and offshore change order effect. The margin is steadily improving without one-off items. So overall, I'd like to say that profitability continues to improve on a quarterly basis. And beyond the Shipbuilding division, we observed significant top line and margin growth in the Engine and Offshore plant divisions.

Next, Samho. Samho delivered solid margins despite reflecting the highest proportion of incentive bonuses within the Shipbuilding division supported by a quarter-on-quarter growth in both revenue and operating profit as well as the smooth resolution of the fire incident in the previous quarter.

Let's move on to Page 10. Hyundai Marine Engine. Its operating profit growth outpaced the revenue growth. And despite partial delays in engine deliveries, revenue increased supported by a higher foreign exchange rate, ASP growth and expanded parts sales. And operating profits increased significantly, driven not only by FX tailwinds but also by productivity improvements, ongoing cost reductions and higher-margin parts sales. So in 2026, we have expectations about this specific division.

And then from the Energy Solutions, its operating profit remained solid, in line with Q3. The revenue increased by 26.2% quarter-over-quarter driven by efforts to expand domestic market share and higher exports to the United States. And operating profit declined slightly quarter-over-quarter due to changes in product mix and higher costs, but profitability remained stable. In 2026, we believe these efforts will continue, so that this division would achieve solid performance.

Now Page 11. In terms of nonoperating profit, there were significant gains related to FX valuation due to the strong dollar.

And lastly, on Page 12, financial ratios, all shipbuilding subsidiaries are in net cash position with a combined total of approximately KRW 6.2 trillion in net cash, reflecting outstanding financial health. So this concludes my presentation on our Q4 2025 results. Thank you for your participation. In presentations on Shipbuilding and Offshore division outlook will continue.

[Interpreted] Good afternoon. I am [ Eun-Suk Lee ], Executive Vice President of Strategic Marketing Division at HD KSOE. I'd like to present a review for the Shipbuilding division and then share our outlook for the business. To begin with, according to Clarkson Research, global new building orders this year reached 100.99 million GT, a decrease of over 20% compared to last year's 143.90 million GT. Nevertheless, the fact that the order volumes remain above the 100 million GT mark indicates that the newbuilding market is still in a boom cycle. And despite initial concerns that 2025 orders would see a sharp decline following the high volume of recent years, we evaluate current performance to be significantly resilient and healthy.

Despite a slight slowdown in global orders compared to 2024, our group shipbuilding subsidiaries have achieved robust performance HHI Shipbuilding division, $7.886 billion, reaching 125.2% of its target and HHI medium-size ship division secured $2.246 billion, Samho $6.687 billion and HVS $378 million and HHIP $220 million, so $17.417 billion in all. And this figure represents 116% of our group's 2025 shipbuilding order target of $15.02 billion. Despite the overall slowdown in global newbuilding demand, we have successfully exceeded our annual guidance through strategic sales initiatives.

Let's take a closer look at our order intake by vessel type for each subsidiary. Hyundai Heavy Industry Shipbuilding division secured a total of 48 vessels, 28 container ships, 8 Suezmax tankers, 3 VLCCs, 4 VLACs and 2 VLGCs and 2 VLECs, so 48 vessels.

Our medium-sized ship division achieved a total of 34 orders consisting of 21 feeder container ships, 6 LNG bunkering vessels, 5 midsized LPG carriers and 2 medium-range tankers. In Hyundai Samho, 44 vessels in total, 24 large container ships, 9 Suezmax tankers, 4 VLCCs and 7 LPG carriers. And HVS secured 6 vessels, 3 long range 2 tankers and 3 medium-range tankers. HHIP secured 3 long range 2 tankers to its backlog, so 135 vessels in total in aggregate. And our group capitalized on heightened U.S.-China trade tensions in the first half of 2025 when preference for Chinese shipyards weakened by focusing on containerships and securing multiple large container ship orders.

In the second half, we diversified into tanker and LNG carrier orders in line with the changing market demand. And as a result, we have flexibly adjusted our order portfolio without overreliance on any single vessel type, supporting both order growth and profitability. As of the end of December 2025, the Clarkson Newbuilding Price Index was 184.65, down slightly from 189.16 in 2024, but still at a high level despite lower ordering activity. Supported by solid order backlog accumulated over recent years, newbuilding prices are expected to decline only gradually and in a limited manner going forward. And this will be contingent on our strategy, which will stay similar.

While concerns remain that oversupply and declining freight rates could trigger a market correction, newbuilding demand has far stayed at cycle high levels, supported by rotating demand across various vessel segments. In addition, tightening environmental regulations are expected to drive delayed replacement demand for aging vessels as freight rates soften, supporting new building demand.

And next, I will briefly cover market conditions by vessel type. Container vessel ordering reached a record level in 2024 with 479 vessels totaling approximately 4.7 million TEU and surpassed the level again in 2025 with orders for 644 vessels amounting to around 4.8 million TEU. This exceptional level of ordering was driven by aggressive investments from major liner companies with strong demand, not only for large vessels but also for small and midsized ships as reflected in the disproportionate increase in vessel numbers relative to TEU capacity.

And looking ahead, however, given the heavy ordering activity over the past 3 years and the normalization of container freight rates, the ordering momentum from major liner operators is expected to moderate. In the LNG carrier segment, new orders declined sharply in 2025 to 34 vessels and less than half of the 78 vessels ordered in 2024. And this was mainly due to a temporary oversupply following large-scale LNG carrier deliveries which pushed spot LNG rates close to historical lows as well as delays in final investment decisions for new LNG projects in North America during the Biden administration.

So having negative impact on vessel demand. However, following President Trump's reelection, more than 70 MTPA of new LNG projects secured final investment approval in 2025 alone. And with over 200 MTPA of additional global LNG capacity expected by 2030. So LNG carrier newbuilding demand is widely expected to increase significantly. In the Tanker segment, tighter U.S. sanctions and the shadow fleet are expected to constrain available capacity, driving increased demand for compliant tanker fleets.

In addition, replacement demand for aging vessels previously delayed by strong freight of rates remains latent. While shipowners supported by ample cash flows from the prolonged tank up cycle expected to continue new building investments. Meanwhile, the VLGC and PCTC markets which saw heavy ordering activity during 2023 and '24 have entered a pause in new building investments due to concerns over upcoming large-scale deliveries. Order activity is expected to recover once the scheduled deliveries absorbed by the market.

And this year, the global shipbuilding market is expected to remain uncertain and volatile as in 2025 amid multiple geopolitical factors. And these include a potential return to normal Suez canal operations and shifts in energy logistics driven by U.S. policies in Venezuela and Iran, a possible end of the Russia-Ukraine war and renewed U.S.-China trade tensions.

The making, the market outlook increasingly unpredictable. Against this backdrop, our group will closely monitor global developments and remain agile in adjusting our strategies to sustain order competitiveness and enhance shareholder value. And this concludes my remarks on Q4 2025 results. Thank you for your attention. And then a presentation about our Offshore division.

[Interpreted] Good afternoon. I am Son Dae-jun, Senior Manager at Offshore Energy Business division, I would like to briefly walk you through our Q4 performance and market outlook. Our Offshore division is actively bidding on FEED and EPC projects across the Middle East, Australia and Europe. In particular, our Middle East projects, we expect final announcement within Q1 and final contract signing by the first half of this year.

In the Offshore wind sector, we're leveraging our in-house technology to expand our global footprint. Our independent offshore substation model, high OSS has secured DNV's approval and principle validating our technological edge. And based on this, we're actively bidding for major domestic and international projects, and our goal is to secure our first EPC contract this year marking 2026 as the inaugural year of our Offshore Wind Construction operations.

In the floating offshore wind sector, Hi-Float model has secured ABS AIP for both 15- and 18-megawatt capacities, backed by our proven experience in commercial scale feed. While the global commercialization of floating wind is seeing some delays, we're proactively engaging with major developers to explore strategic partnerships. And we are also reviewing participation in domestic testbed projects to further solidify our commercial readiness. In the SMI sector, we're making significant progress with TerraPower's Wyoming demonstration project. Following the fabrication contracts signed last October, we have now entered a full-scale production phase.

Beyond fabrication, we're conducting joint R&D for SMI commercialization through our close partnership with TerraPower, building the technical expertise needed to capture future global opportunities.

And next, let me briefly discuss market outlook. With oil prices remaining above USD 50 per barrel, the offshore plant market is not overheated and continues to support stable profitability.

In addition, demand for crude oil and natural gas for power generation is expected to keep rising, reinforcing energy security as a key priority for many countries. Global oil majors are prioritizing offshore investments in high-efficiency regions such as Guyana, Brazil and Africa. And meanwhile, national and international oil companies across the Middle East, Australia and South America continue offshore oil and gas developments to secure stable resources and expand production.

In the Middle East, including Qatar, the UAE and Saudi Arabia and Kuwait, offshore gas field development is accelerating with large-scale projects planned and the market expected to stay active. And while the offshore wind market faces some near-term adjustments due to U.S. policy shifts and rising development costs, medium to long-term growth remains intact. And here in Korea, the government is advancing offshore wind expansion through the Offshore Wind Special Act, which will take effect this march along with initiatives to strengthen R&D, supply chains and demonstration testbeds, supporting a public-led market and broader industry-wide structural change. These are the changes that we're witnessing here in Korea.

And based on these conditions, we're pursuing a balanced approach across Offshore, Offshore Wind and SMI businesses, focusing selectively on projects that ensure profitability and stable execution. That concludes my remarks on our Q4 performance and market outlook. Thank you very much.

[Interpreted] [Operator Instructions] The first question will be presented by Lee DongHeon from Sinan Investment Securities.

[Interpreted] My question is about bonuses. And of course, you didn't disclose the exact numbers. So I wonder what your bonus policy will be this year, 2026? And of course, just last year, the bonus payments would be aligned with your business performance. And my question would be about whether you are applying the exact same standards across different ministries and whether there is any possibility that bonus payments would increase this year?

[Interpreted] Thank you for your question. And apologies, my apologies once again for not being able to disclose exact numbers of bonus payments. When we made bonus payments, predictions are made on an annual basis and then we make payments accordingly on a quarterly basis. And for this quarter, performance outrate and outpace our initial expectations. So we had stellar performance for this year, which means that we had additional bonus payments that were given to our employees.

As to, Samho. Samho is subject to 1,000 percentage cap in terms of bonus payment. So that was how bonus payments were made at the 1,000% cap at Samho. For Hyundai Heavy Industries and KSOE, the cap is lower than that. It's around 800%. So that's how bonus payments were made in line with the set rate. For subcontractors, different policies would apply. And if all these bonus payments were excluded, then our operating profit margin would have been around 15%. I told you that our OP margin was 13.7% for this year -- for this quarter. So the bonus payment had an impact of over 1% in terms of our operating profit margin.

[Interpreted] The following season will be presented by Choi Kwang-Sik from DAOL Investment Securities.

[Interpreted] So my question is as to your quarterly revenue, can you share with us the proportion or ratio by order year?

[Interpreted] So let me give you the following numbers. Based on Q4, Hyundai Heavy Industries revenue by order year is 27% in 2022, 53% in 2023 and then 20% in 2024. As to Mipo, and this will be the very last time, they will be mentioning Mipo because of the merger, 0% in 2022, 37% in 2023 and 63% in 2024.

And coming to Samho, it's 10% in 2022, 55% in 2023 and 35% in 2024.

[Interpreted] The following question will be presented by Dongik Jeong from KB Securities.

[Interpreted] I have 2 questions about your Engine division. The first question is about the partial deferral that you mentioned. Can you share with us the reasons why such partial deferral happened? And did it occur within Hyundai Heavy Industries Engine business? Or did it occur with Hyundai Marine Engine business?

My second question is if it were not for bonus payments, then what would have happened to the OP margin to your engine business? And I wonder whether it has been improved or stayed at a similar level when bonus payments were considered?

[Interpreted] To answer your first question, such deferral occurred, both at Hyundai Heavy Industries and Hyundai Marine Engine. So productions were complete in December, but the shipments occurred in January. And I think this happened last year as well, but it all reflected in our productivity gains and productivity -- profitability improvement. So if you look at January of 2025, the same thing happened. So you will see a jump or whether a sharp increase in operating profit because of the similar situation that happened. So that certainly had an impact.

And if I answer your second question, my apologies, once again, but we haven't done our exact calculations as the bonus payment. So maybe I could disclose some relevant data if I have an opportunity next time.

But the same rule applies as the rules that we have at Hyundai Heavy Industries. So anyway, we multiply the number of employees by a set amount of rate or the amount.

[Interpreted] The following question will be presented by Young Soo Han from Samsung Securities.

[Interpreted] My question is also about your bonus payments. So you mentioned the bonus payments were made to your subcontractors. Is it happening for the first time this year, I mean, in 2025? And also my question is about whether we should recognize this as a one-off expense? Or is it any structural change? So can we consider this as a permanent or permanent increase in the level of wages? Or is it just because there were extra performance and then bonus payments were made accordingly?

[Interpreted] So my answer would be I think it's a correct understanding of our bonus payments would be it's a one-off cost. It's because when we make out bonus payments, the calculations are based on our OP margin. In 2024, 2 years ago, when we had our year-end settlement, we had projections about our 2025 performance, but in fact, our performance was better than our initial expectations in 2024 and in alignment with increased performance, additional bonus payments were made. The same applies to this year as well. We have already projected our ambitious performance and if there is additional performance, extra performance, and that will be translated into additional bonus payments.

And if I make additional comments and as to labor cost increases, we have already considered these possible increases at the beginning of each year, and these were reflected already, but there are variables affecting our performance, foreign exchange rates and plate prices and then productivity gains. As to foreign exchange rates, as you know, the one depreciated quite sharply. We do -- we certainly do hedging, but there are portions that are not hedged, which will be translated into increased performance.

And as to plate prices, they're subject to change affecting our productivity. And the third factor productivity, we would be only able to know how more productive we become only after a certain amount of time passes. So initially, there are things that we cannot predict or sometimes we are conservative. And that means it's more appropriate to consider these expenses as one-off expenses.

[Interpreted] The following question will be presented by Kwang-Sik Choi from DAOL Investment Securities.

[Interpreted] My question is about LNG vessels, especially LNG ordering. So from the end of 2025 and through 2029, the new building price would be still under $250 million, we believe. And we know that a lot of the orders were awarded to Chinese shipyards, and especially we hear the news that Hudong-Zhonghua is increasing its capacity. So, my question is, how much capacity increases do you see among Chinese LNG shipyards? And also, when it will be possible the Korean shipyards take back their power in terms of price negotiations?

[Interpreted] So if I answer your question, to be honest, we do not know exact or accurate information about Chinese shipbuilding capacity. The information available, data available only comes from the information that these Chinese shipbuilders release or the broker or market information. But recently, Hudong-Zhonghua says its capacity is 30 vessels per year, and there are several Chinese shipyards able to, capable of building LNG carriers. But I would like to take note of 2 of them, Hudong-Zhonghua says it can build 30 such vessels, and Jiangnan says 10 vessels. But I don't believe that these shipyards are consuming all their capacity because they are in anticipation of possible volumes of Qatar as well. As to Hudong-Zhonghua, yes, it is increasing its capacity, but as to Jiangnan, even though it's making efforts, it's lagging behind Korean shipyards in terms of quality and also technological level.

It's true that Chinese shipyards are making great progress in recent days, but most of their capacities are absorbed due to by their domestic demand to build LNG vessels that should be allocated to absorb their domestic demand.

And these Chinese shipyards, maybe they are getting orders from the Qatar project. But if you look at international tender market, you would see that these Chinese shipyards are rather excluded from the market. This is evident when you look at [indiscernible], Mozambique, and Equinor and then Chinese shipyards are not joining where they are, being preventive from joining on these projects. And because of that Korean shipyards are maintaining our market share and also you would ask about the recovery of new ship -- new building prices and I think is an ongoing process. So we do see new building prices are recovering. We're engaging in consultations with our customers, and we do see recovery in demand and strong demand.

If you look at orders coming from the second half of last year or early this year, I think most of them were rather speculative. But if you look at ongoing consultations, these consultations are being made already on a higher price base, and we believe in 2026, we will see a steady increase in new building prices.

[Interpreted] The following question will be presented by Kang Kyungtae from Korea Investment Securities.

[Interpreted] I have 2 questions. The first question is about your special vessel business. So you shared with us your Q4 revenue as well as full year revenue. And then you mentioned that there were changes in export product mix impacting your overall performance. So my question is, what would be the flagship projects that would be responsible for your revenue in Q4 and going through 2026? And my second question is, a month ago, we had a consultation session together, and you shared with us your order pipeline at the time, and I wonder whether there have been any updates made to your order intake pipeline going through 2026.

[Interpreted] So, to answer your question, as you mentioned, your question was about our change in export mix and its resulting impact on our performance. So if you look at Q3, Q2 and Q1, Q2, and Q3 of last year, in 2025, we had this Aegis Destroyer project, whose order came from the Korean Navy and also from the Philippines. We already delivered 2 patrol ships, and there are six guarded ships which are under construction for the Philippines. And in Q4, the Aegis Destroyer project was almost its final stage. And as you know, this destroyer is very high priced. As a result, we had a rather decrease or a downward pressure on our revenue overall.

If you look at the guard ship and the coastal guard ship from the Philippines, and also we have a 3,000-ton [indiscernible] guard ship for the Korean Navy. Then these were reflected in our Q4 results as well, and increasing our overall revenue slightly. Also, I'd like to say that we have an ongoing project in Peru as well. It's ongoing, and in the second half of last year, we had this LCU, which is under construction, and I believe that this specific project would be materialized to a quite mature level in Q4 as well. So coming into this year, we have things that are materialized at scale, and this includes frigates and as well as patrol ships as well. So a temporary slowdown, but in 2026, we believe overall we will see an expansion in our export revenue.

As to our order pipeline is still early. It's in the beginning of the year. And as you know, as to naval ship business, we do not get orders this early because it's all based on national and government budget. But bidding is ongoing -- bidding efforts are ongoing. But in 2026, we are aiming to win orders for follow-up projects from the Philippine Navy, and this includes new builds, but also this includes a retrofit of existing frigates, and this way we would be expanding or scaling our impact. And in other countries, we are starting with our bidding efforts.

So again, it's still in the early of this year, so but I hope we can share good news pretty soon. In the special purpose vessel business, there are things that we're pursuing, and I hope we can share good news in one month or two months of time.

[Interpreted] The following question will be presented by Lee DongHeon from Shinhan Investment Securities.

[Interpreted] My question is about your overall offshore business. You mentioned the reflection of change, order impact as well as bonus payments, and given that OP margin was almost 17%, I wonder whether the factors you mentioned would be quite permanent or just a one-off. So what are your expectations for your offshore business this year?

[Interpreted] So our quarterly, quarter-over-quarter revenue quite jumped and skyrocketed, I would say. But when we are excluding change order impact and bonus payments, it could have been -- would have been far lower than that. And my apologies for not being able to share any percentage-wise data or numbers. But if you look at our offshore business, and if you look at the POC, the progress rate of each project, Trion FPU is 58.6% and Ruya project is 12.4%. So on annualized terms, these projects would produce a steady and stable performance. So again, apologies for not being able to disclose specific numbers, but our offshore business would sure to generate stable and solid performance throughout the year.

[Interpreted] The following question will be presented by [ Bae Ki-yeon ] from [ Meritz Securities ].

[Interpreted] So vessel business. You were awarded an order for 200,000 CBM LNG carrier. And I wonder, in terms of profitability, how does it compare to 124,000 class carrier? And with this type of vessel, I mean, when compared to 74,000 capacity of vessel, whether it can really fill your existing docks given your construction and building capacity. So in terms of the number of vessels, is it going to be the same when you consider 74,000 vessels? The reason why I'm asking this question is when you look at market demand, there should be future profitability that would be guaranteed and whether -- well, and I wonder whether with this 200,000 class vessels, we can expect the same level of profitability. You mentioned that vessel prices are recovering, but until then, maybe then this is one of the strengths that KSOE has to enjoy.

[Interpreted] So when it comes to 200,000 vessels, there are only 2 companies throughout the world who can build and deliver such vessels. We have Hanwha, and Hyundai Heavy Industries is the other. But in terms of track record, I believe Hyundai Heavy Industries has an overwhelming track record in the world. So in terms of 200,000 vessel, Hyundai Heavy Industries is the best and the first in the world. And with 200,000 vessels, we have 2 advantages. First of all, this vessel is optimized for connecting U.S. and Asian waters, so we expect continued demand for this type of vessel.

And second of all, we can use our docks #8 and 9, but these docks can accommodate 174,000 as well. But in terms of maximizing the value of our existing slots, 200,000 would be the optimal candidate. So in that sense, it has its value. But in terms of profitability, it's confidential. So my apologies for not being able to disclose any profitability-related data.

[Interpreted] The following question will be presented by [ Jung Yeon-seung ] from NH Investment Securities.

[Interpreted] I have 2 questions. The first question is about your mid-sized vessels. So globally, we hear news about ordering mid-sized and also mid-range and long-range vessels and especially from the Philippines and Vietnam. So do you believe you can expect meaningful orders coming from these countries, the Philippines and Vietnam? It's because given the local cost, which would be quite low, I believe these mid-sized vessels can be good in terms of profitability. And my second question is between November and January this year, we had around 10 million GET ordered, but -- in spite of that, we do not see any sharp increase in new build prices. So from the viewpoint of KSOE, how do you expect new build prices to continue throughout the year?

[Interpreted] So if I answer your first question, and in fact, with mid-range and long-range 2 vessels, our order performance for 2025 was not satisfactory. There are several reasons why. First of all, globally, the order activity was not that active throughout the world for these vessels. And in 2024, there were lots of orders that were awarded for these vessels in 2024. So in terms of delivery and price attractiveness and investment attractiveness, these mid-sized ships decreased in terms of that. So that prevented us from making new investments. And I would say the year 2025 was a period of adjustment.

And during this period, both in terms of delivery and attractiveness, these mid-sized ships gained traction and momentum. Now companies are making efforts to win orders for these ships. And especially in 2026, we do see increases in tanker freight rates, which means that there are new -- more new build orders, and we have ongoing consultations for the mid-range and long-range 2 vessels. But about the profitability of these ships, once again, I cannot specify any numbers or data due to confidentiality. My apology for that.

And to answer your second question about vessel prices, I think vessel prices have been recovered already to a significant extent, slightly than its previous peak, but still it's recovering. And in 2024, I think in 2025, we had less orders coming. And given that, the very fact that vessel prices are maintaining their current status, that's already a good news in and of itself. And we believe that vessel prices could be increased further.

If you have don't have any questions, then I would like to take one final question. But before that, because so many of you have posed questions about bonus payments, I'd like to make some comments. In terms of paying bonus -- in making bonus payments, it's a complicated and complex process, both in terms of internally and when we consider our subcontracting businesses, it becomes even more complex. So if you make a phone call and if you reach us, then we would give you further details about this. And I mentioned a very specific number, which was 800%. But overall, it's between 600 and 800 percentage points within this range, our bonus payments were made. And again, for details, our negotiations have not been determined yet. And if it is concluded, then maybe we would be able to disclose as much as possible.

Due to time constraints, we would like to conclude our Q4 2025 earnings call. If you have any further questions, please reach out to us. Thank you.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good afternoon. This is [indiscernible] from [indiscernible] IR. I would like to start the Q3 2025 earnings presentation. This is going to be our shipbuilding subsidiaries and our key businesses. First of all, I would like to go over the key highlights of the quarter followed by our performance. Then I will discuss market conditions for shipbuilding and offshore plant businesses and move on to the Q&A session.

First of all, currency impact. In Q3, the quarter end FX rate increased by KRW 46 trillion, while the average rate decreased by KRW 13 trillion. As a result, the overall FX impact was minimal. For reference, the rate had fallen by KRW 49 trillion in the previous quarter. And second, steel prices. Steel prices stayed flattish with minimal impact on the margin. Despite a bit of losses, steel prices did not impact our margin significantly. So a bit of losses from currency impact and steel prices, but no sizable impact on our margin. Third, one-off factors. At HHI, approximately KRW 25 billion [indiscernible] in additional costs were recognized from legacy offshore plant projects. And recently launched projects are proceeding smoothly and continue to maintain solid profitability. And at HMD, KRW 53 billion [indiscernible] of one-off gains for Kiwi Rail project cancellation settlement and related cost reforms were recognized.

And at [indiscernible], around KRW 8.5 billion in restoration costs were incurred due to a transformer fire incident. Next is one-off costs regarding the collective bargaining agreement and merger incentives, including incentives [indiscernible] HHI and HMD recognized KRW 18.6 billion and KRW 7.2 billion, respectively, so mostly merger incentives.

Lastly, for the annual breakdown of revenue by shipbuilding subsidiary, you may refer to the IR material. And for the breakdown of revenue by vessel type, first of all, HHI, LNGCs, 49.2%, inching down quarter-over-quarter and LPGC, 26.4% increasing; and container ships, 16.7% decreasing. Now [indiscernible] LNGCs, 38.2%, inching down, container ships, 34.2% decreasing. Tankers, 15.1%, increasing significantly and LPGCs 5.7%, remaining unchanged.

Now Mipo's, PCs, 62.5%, inching down, LPGCs, 23.3%, increasing slightly and for other vessels, 13.6% increasing.

Now Page 4, please. I will move on to Page 4 and elaborate more on KESOE's Q3 2025 earnings. But before moving on to the financial results, let me briefly mention one notable point. Q3, as you know, has been the lowest season in terms of sales and it is normal to record lower sales than the previous quarter. But despite long vacation periods, our sales rather increased quarter-over-quarter, and it is an exceptional case. The sales increased by 2.1% quarter-over-quarter and by 21.4% year-over-year, which is attributable to productivity gains and other factors.

Despite a weak dollar and seasonal factors, our revenue increased driven by steadily enhancing productivity driving our overall revenue. OP increased by 10.5% quarter-over-quarter and by 154.5% year-over-year, a significant increase. So steady improvement in profitability has been maintained, and I will touch on the nonoperating part later. Page 5, earnings by business division, and please refer to the table below, and let's turn to Page 6 for further details. Page 6 and sales by key division. First, on the Shipbuilding segment, despite a weak dollar and fewer working days, revenue is solid, supported by higher vessel prices and improving productivity. So it have been better if there was no incident at TAMCO. And next, offshore. Sales increased 13.1% quarter-over-quarter and 52.8% year-over-year. The [indiscernible] FPU has entered its full-scale construction with 39.4% of completion rate, while the Ruyah project recorded a 6.3% progress rate. Now engine sales. Engine sales increased 6.4% quarter-over-quarter, 31% year-over-year, driven by higher delivery volumes and an improved product mix.

Page 7. And here is the breakdown of OP by division. First of all, shipbuilding. Despite a weak dollar and seasonal factors, OP increased significantly 7.5% quarter-over-quarter, 128.9% year-over-year and recorded a very solid profitability with OPM of 14%. So compared to Q2, we have an increase in OPM. Now offshore. Offshore slightly turned negative, but excluding one-off factors, the underlying margin remained solid. One-off losses of KRW 25 billion were recognized from a vintage project.

And next, Engine & Machinery. Engine OP increased 20.9% quarter-over-quarter, 137.5% year-over-year. As I mentioned earlier, overall profitability has improved, supported by sales growth and product mix enhancement and especially [indiscernible] engines ratio, if you look at the ratio, 2-stroke engines, 75% and 4-stroke engine, 80%, showing growth.

Now naval vessel, which is not included in this page, sales recorded KRW 373 billion, increasing by 63.7% quarter-over-quarter. Recognition of [indiscernible] revenue has increased and KRW 15.8 billion one-off settlement for 2 frigates that were delivered in 2023 has been made in this quarter. OP recorded KRW 51.1 billion, increasing by 90% quarter-over-quarter.

As I recall, profit fluctuations may continue to occur depending on the timing of project settlements and the mix. So in the following quarter and after that, we may witness such profit fluctuations.

Now Page 8. Please refer to the operating performance table of consolidated subsidiaries, and I will provide a more detailed explanation on Page 9. First of all, KSOE, on a stand-alone basis, KSOE turned positive, receiving half year dividend payments from its subsidiaries amounting to KRW 299 billion. So once again, turning positive, supported by higher vessel prices and continued productivity enhancements, HHI's Shipping -- Shipbuilding segment delivered steady sales and margin growth compared to the previous quarter. And as I mentioned earlier, the engine business also maintained a solid operating performance with significant margin improvement this quarter. Although there were one-off costs occurring from a vintage project, it is worth noting the current projects are progressing smoothly. So for offshore, we may expect even better results in Q4.

Let's move on to Samho. Despite the fire incident, its annual construction target is under control. So Q3 margin was lower than Q2 due to restoration costs and increasing sales portion of tanks, but we expect Q4 margin to recover and show stable operating performance.

Now Page 10, Mipo and Mipo's earnings growth is accelerating. So despite fewer working days, Mipo benefited from faster product mix improvement, higher vessel prices and stronger productivity gains compared to other subsidiaries. So quite a noticeable change and improvement, especially recognition of projects awarded after 2024 accelerated from 32% to 51% this quarter. And this contributed to rapid margin growth, thanks to productivity gains. So there was about Mipo.

And next, Hyundai Marine Engine. Despite the seasonal slowdown, the business achieved steady improvement in ASP and productivity, resulting in higher margins compared to peers and other shipbuilding subsidiaries. And also, the company has engaged in continuous cost control activities, resulting in high margin growth. And there were no one-off factors recorded in this quarter. So in Q4, we believe revenue would grow and there will be additional profitability that we're expecting.

Now lastly, HD Hyundai Energy Solutions, although its operating performance appears to have declined from the previous quarter, excluding the one-off Angola project revenue recognized in Q2, the company has continued to show steady quarterly growth. And although domestic sales slightly declined due to the prolonged autumn rain, exports to the U.S. increased significantly, resulting in solid overall performance. Looking ahead, the easing of tariff issues in the fourth quarter is expected to further support U.S. exports, allowing the company to sustain its strong performance.

Now Page 11, nonoperating income, nothing special, but due to a KRW 46 increase in the Korean won, U.S. dollar quarter end FX, we recorded foreign exchange-related gains. And Page 11, financial ratios. All 4 major subsidiaries maintained a net cash position with a combined net cash balance of approximately KRW 8 trillion, a very solid financial standing. And the cash flow is very good. So that concludes the presentation of HD Korea Shipbuilding and Offshore Engineering's Q3 2025 earnings.

And next, Mr. [indiscernible], Head of Ship Sales Division, will provide an update on the global shipbuilding market.

Hello. I am [indiscernible] Lee, Executive VP of Strategy and Marketing at HDKSOE. I would like to present the performance review for the Shipbuilding division and then share our outlook for the business. Now global new orders totaled 51.2 million GET or 1,185 ships, down more than 45% from 113.4 million GET in the same period last year. And this decline reflects the weaker demand sentiment among shipowners amid U.S. trade policy volatility, environmental regulation uncertainty and a high backlog from 2024 orders. Despite the sluggish orders, HD Group has recorded cumulative orders of USD 6.2 billion at HHI and USD 4 billion at Samho and USD 2.2 billion in NIO and USD 0.2 billion at HHIP as of Q3 2025, totaling USD 12.6 billion, and this represents 84.2% of our annual order target of USD 15 billion, demonstrating steady order momentum and continued progress toward achieving this year's goal despite the weaker global demand.

As of Q3 2025, the cumulative newbuilding orders by vessel type are as follows: Hyundai, 24 container ships, 2 VLGCs, 2 VLECs, 2 VLACs and 4 tankers, including 2 VLCCs, the 34 units of ships, USD 6.2 billion. Now Samho 5 LNGCs, 14 container ships, 8 tankers, so 27 units of ships or USD 4.02 billion. MIPO, 21 containers ships, 6 LNG bunkering vessels, 1 PC, 5 MGCs, 33 units of ships, USD 4.02 billion. HHIP, 3 PCs, so USD 0.22 billion. In total, 97 units of ships, USD 12.64 billion.

Despite the overall contraction in demand this year, we have remained firmly on track towards achieving our ambitious annual targets. Leveraging the continued strength in containership orders since last year, we focused on selectively securing high-value, high-margin projects to ensure a stable backlog and sustained profitability. And this performance underscores our solid competitiveness supported by superior technological capabilities and agile market responsiveness. As of September 2025, the [indiscernible] newbuilding index stood at 185.58, gradually declining from the peak of 189.96 recorded in September 2024. However, the current level remains more than 40% higher than that of early 2021, indicating that prices are still firm. This trend suggests that ample shipyard backlogs have helped mitigate the pace of price drop despite lower demand.

And as new order activities have shown signs of recovery entering Q4, newbuilding prices are expected to remain at a high level. And I'd like to share an update on the current market conditions by vessel type, LNGC. Up to Q3, only 17 large-sized LNGCs were ordered in the market, a sharp decline compared to 74 units in the same period last year. This is largely attributed to a temporary downturn in the LNG freight market driven by increased vessel deliveries, reduced LNG imports from China and a higher share of short-haul trade between the U.S. and Europe, which together have disrupted the overall supply-demand balance.

In addition, delays in several major LNG export projects have further weakened newbuilding activity. However, as new LNG development projects resume and replacement demand for outdated LNG carriers begin to emerge, the LNG carrier market is expected to recover swiftly in the coming quarters.

Now container market. Despite uncertainties stemming from U.S. tariff disputes and port fees, the containership market continues to show strong momentum. And this is supported by sustained ton-mile demand due to ongoing disruptions in the Red Sea and by liners' perception that reduced U.S. port fees are now manageable costs through fleet adjustments backed by ample cash reserves, major liners actively expanding their fleets and with continued competition in capacity expansion and the shift toward eco-friendly vessels, a solid level of new orders is expected to persist.

And tankers. In the Tanker segment, vessel supply remains constrained as the U.S. and Europe continue to expand sanctions on Russia, Iran and Venezuela. Combined with OPEC+'s production increase, this has pushed crude tanker rates higher sharply. And with firm freight rates and low order backlog, tanker newbuilding activity is expected to gradually increase. For VLGCs and PCTCs, ordering activity has eased following several years of exceptionally strong demand. However, once the current wave of vessel deliveries is absorbed, replacement needs for aging fleets and tightening emission regulations are expected to drive a rebound in newbuilding demand. Following the IMO's recent failure to finalize the net zero framework, there are growing concerns that the resulting regulatory gap could dampen the investment sentiment for new buildings and alternative fuels. Nevertheless, the IMO's net zero target remains in place, and the industry broadly expects the long-term decarbonization trajectory to stay unchanged.

Consequently, companies that delay participation in the clean fuel transition are likely to face increasing cost burdens over time. In this context, the group will continue to strengthen its technological leadership. In addition, given the ongoing market volatility driven by U.S.-China strategic tensions and various geopolitical uncertainties, the group will continue to closely monitor market conditions and pursue a selective profitability-focused order strategy. Amid the rapidly changing global shipbuilding and shipping environment, KSOE remains committed to sustainable growth and shareholder value enhancement, striving to take a significant step forward as a global industry leader. And this concludes our Q3 2025 results presentation. Thank you very much for your attention.

And moving on, we're going to have [indiscernible] from Offshore & Energy.

Good afternoon. This is Dejun [indiscernible] from Offshore & Energy. I'd like to present the performance review for the Offshore division and then share our outlook for the business. Our offshore business is actively participating in FEED and EPC biddings for various offshore projects currently being prepared in regions such as the Middle East, including the UAE, Qatar and Kuwait as well as Australia and the Americas. Among these Mid Eastern projects have adjusted their schedules with contracts signing now targeted for early 2026.

Renewable energy business, particularly offshore wind power, is actively involved in the FEED process for offshore substations and domestic projects and is making efforts to expand into full EPC contracts. Using our proprietary floating structure model, we're also engaging with multiple developers to participate in floating wind projects in Korea's East Coast, Scotland and Taiwan. And in addition, our in-house offshore substation platform model recently received an AIP or approval in principle from a classification society and which we plan to apply to upcoming FEED projects to further broaden our participation opportunities in offshore wind business. We are currently carrying out Terra Power's SMR demonstration project in Wyoming, the United States and conducting joint research with the company to support SMR commercialization. Through these efforts, we aim to strengthen our technological capabilities and expand future business opportunities.

And next, market conditions. As oil prices remain above breakeven levels, the overall offshore plant market is not overheated, but remains generally favorable. Meanwhile, demand for crude oil and natural gas for power generation is expected to continue rising and energy security is emerging as a key issue for many countries. Major oil companies are focusing investments in high-return regions such as Guyana, Brazil and Africa, while national oil companies and IOCs in the Middle East, Australia and North America are gradually expanding CapEx for domestic offshore oil and gas developments.

In the Middle East, including Qatar, the UAE and Saudi Arabia and Kuwait, offshore gas field development is accelerating with large-scale projects planned and the market expected to stay active. The offshore wind market is seeing some short-term slowdown due to policy changes in the U.S., but mid- to long-term investment and capacity expansion are expected to continue. In Korea, government-led initiatives are increasing expectations for market growth, along with a stronger domestic turbine supply chain. So especially, we're expecting a structural change occurring across the industrial ecosystem here in Korea. Based on these conditions, we're pursuing a balanced approach across offshore, offshore wind and SMI businesses, focusing selectively on projects that ensure profitability and stable execution.

And that concludes our remarks on the Q3 performance and market outlook. Thank you very much.

[Interpreted]

[Operator Instructions] The first question will be provided by Lee DongHeon from Shinhan Investment Securities.

[Interpreted]

First of all, congratulations on very positive performance. My question is about any remaining one-off costs that might incur. So it seems like the Kiwi settlement is almost completed. And I'm wondering whether there are any remaining costs that could be incurred due to the transformer fire incident affecting Samho. And as to the KRW 25 billion offshore project, can you tell us about what the project is and any additional costs that you're expecting to incur from this KRW 25 billion offshore project?

[Interpreted]

Thank you for your question. I add to that one-off cost for the Kiwi settlement case, we're expecting a bit more funds to be coming into our book, and that may happen in Q4. As to the -- to transformer fire incident, we do not expect additional costs that we incur and construction is going on very smoothly. As to the offshore projects, we have P74 with 98% completion -- 78 with a completion ratio of 98% and Shenando, 97%, but we do not expect any sizable additional costs that will be occurring.

[Interpreted] The following question will be presented by Power Investment Securities, [indiscernible].

[Interpreted]

My question is about LNG market outlook, and this concerns Mozambique and [indiscernible] slot. And it seems like compared to Samsung and other competitors, I think in 2029, you may have more slots to use. So my question is, what do you think of the order outlook for LNG ships? And what would be the vessel prices that you're anticipating for next year?

[Interpreted]

Thank you for your question. And about LNG, new builds, in fact, this year was quite disappointing. But starting from the second half, thanks to the resumption of approval on the part of the U.S. Trump administration, and that's for -- that's the approval of export projects. We have 5 relevant projects that have been approved in the United States. And worldwide, we have 6 LNG projects, and that is translated into 57 million tons, but such orders would be realized from 2029, I think. So globally, we have increasing interest in LNG and with increasing inquiries about new builds. As to the exact number of vessels, I cannot give any definitive answer. But as a rule of thumb, 1 million ton is translated into 2 vessels. So thinking of 56 million tons, that will be more than 100 vessels. As for the vessel prices, based on the demand, I think now ship owners believe the vessel prices are bottoming out, which means the vessel prices may increase gradually.

[Interpreted]

The next question will be provided by [indiscernible] from Merz Investment Securities.

[Interpreted]

I have 2 questions. And my first question is about commercial ships. As to the container ships, you mentioned that liners would continue to place orders because of the transition into greener ships and greener fuels coming into next year. But there have been so many contracts that have been awarded already. So as an analyst, we need a bit of confidence about whether this trend towards the green transition would continue next year as well. It has been already covered by several news articles, but I'm wondering whether you are getting inquiries from key liners. And then how many inquiries are you actually getting?

And my second question is about LPG and so many LPG vessels have been delivered. So you mentioned that new shipbuild orders may come out after such deliveries are all made. Then what would be the timing of these new LNG LPG orders coming?

[Interpreted]

Thank you for your question. And as to container ships, they are primarily large-scale container ships and liners perceive these large container ships as their infrastructure, which means it's a tool for successful competition. So liners believe they need better ships at more affordable prices. So large container, we are making consultations with large liner companies, but details are confidential. So I cannot share any details. But what I can say is numerous -- a large number of liners are planning new builds and maybe the volume may emerge starting from next year.

As to your question about LPG, we can deliver starting from 2028. As you mentioned, many vessels have been already ordered. And in fact, LPG freight rates have turned -- are going down. But as to large LPG ships, we also have demand for ammonia fueled ships as well, but such ammonia fuel demand has come rather late, which means now LPG and ammonia are in competition. So we do not see additional demand immediately. But starting from the second half of 2026, we would be able to start delivery, and then we will see LNG demand coming and emerging.

[Interpreted]

The following question will be presented by Lee DongHeon from Shinhan Investment Securities.

[Interpreted]

My question is about special ships, naval ships because I don't really see any noticeable announcement of special ships. So I'm wondering whether I can ask any questions about naval ships. So we have been -- there have been a lot of news about the [indiscernible], the so-called Masca initiative as well as nuclear power submarines. Can you share with us any highlights about your special ship business?

[Interpreted]

So thank you for your questions. As to the [indiscernible] initiative and nuclear-powered submarines, as you have witnessed and heard from news media articles, currently, we are focusing on a project within the United States. So we are focused on building next-generation logistics vessels for the U.S. Navy. And for this project, we are working with Huntington Ingalls Industries. So we are participating together. We are working together with Huntington Ingalls to jointly propose our -- make a proposal for this project. So initially, the deadline was the end of October, but there was a 2-week delay in the United States. So the process -- the preparation and proposal process will be completed, I believe, by early November, and that's what we are working for right now.

As to the nuclear-powered submarines, you may have heard that the Philly shipyard will be constructing such submarines according to President Trump's announcement. And there would be consultations ongoing between the 2 countries, so ROK and the United States. As to such submarines, what President Trump said is such submarines will be constructed on U.S. soil, U.S. territory and then will be purchased by purchased later. But about exactly how this project will be executed, I believe there would be disagreements between the United States and Korea and such a big project cannot be executed by any single shipyard in terms of capabilities or workforce size. Such a big project, I believe the nuclear power submarine would be a national project. And I'd like to tell you that recently, we have merged with MIPO, significantly increasing our construction capabilities. So we already have a construction capabilities and facilities for the [indiscernible] Navy, and we also think of the Canadian Navy as well. And in preparation, we have significantly expanded and scaled up our construction capabilities for special ships.

[Interpreted]

I'd like to make some additional comments about nuclear-powered submarines, and this is an issue which is receiving plentiful interest these days. You may think this is in the development phase. But once this project is -- begins at full scale, it's going to require tremendous engineering capabilities and especially combined and integrated capabilities. So that is why at the national assembly, this project is considered a national project because no single shipyard will be able to -- will be sufficient in terms of putting in all its resources. So it's on Pan-ministry and pan-government project, and we have 2 major shipyards here in Korea capable of constructing submarines. And this is going to be a joint project, I believe, if it is ever realized.

So at someday, we are making preparations to participate in this project if it starts. And -- but about the local construction in the United States, then it's not an R&D -- domestic R&D project or initiative anymore. So last week, when we had a national audit, there were a lot of questions that were posed to the Ministry of Defense. But if it is, if such submarines are constructed within the United States, then this project would lose its visibility to a significant extent. So there will be a lot of exchanges between the U.S. and Korean governments. And then I'd like to provide 2 of my answer.

[Interpreted]

And we have just released -- made a press release this morning, which is we're going to work with [indiscernible] Shipyard in Peru to jointly develop submarines. So the letter of intent has been signed and they will move on to the next contracting phase. And this means we're going to be able to build our track record in submarine development. And then globally, we will be able to target the submarine export market as well. And such a project is working with national government. And even though it has been announced yet, there are more potential projects that could be -- that could be leading to the next phase of project development. And these projects will be announced at the end of this year or early next year, I believe. And then in the next quarter, when we have an earnings release next quarter, I hope we will be able to share even more tangible progress as to our special ship business.

[Interpreted]

The next question will be presented by [indiscernible] Sun from NH Investment Securities.

[Interpreted]

I have 2 questions. The first question is about [indiscernible] and naval ships. So in addition to the United States and Korea, can you share with us any export market projects that are ongoing, for example, in the Southeast Asia, Latin America and Europe as well? And second of all, we are still focused on submarines these days, but I know that your company has strength in building surface ships as well. So anything more that you can share concerning your surface ship business?

[Interpreted]

Thank you for your question. And currently, the Navy modernization project is ongoing with the Philippine Navy. And for additional orders, negotiations are ongoing. So we cannot disclose details, but if we share any news for the first time about our export cases, then it's going to be the Philippines and especially frigates for the Philippine Navy. And once we build a track record working with Peru and the Philippines, then we'll be able to advance into Southeast Asia and other countries because there are countries interested in our frigate construction capabilities. So consultations are ongoing, but in this sense, we're in competition against our European competitors. So it's not easy. But we already have a demonstration model. So in that sense, we have strength.

And as to submarines, once we develop submarines and demonstrate the submarine while working with Peru, then we already have Portugal, which is interested in our projects. And especially it's below 2,000 ton submarines. In the sense, I think we can build our competitive edge for 2,000 ton and below submarines.

And as to submarines potential submarine projects with Canada and Poland, under the One team spirit, both companies are responding to potential project needs, integrating our capabilities. And I hope that I can share good news next year.

[Interpreted]

The following question will be presented by Kang Kyungtae from Korea Investment Securities.

[Interpreted]

Commercial ship exports of Mipo because before and after the merger, it seems like order activities of Mipo have virtually stopped. So Mipo has a shipyard in Wan. And my question is about the division of labor, I would say, or functionalities. Because when I look at mid-range tankers and feeder ships, it seems like order activities have again almost stopped. And as to LNG bunkering vessels, I think we have less volume this year. So what's happening to Mipo as to commercial ship [indiscernible].

[Interpreted]

Thank you for your questions. What I can say is the module and MIPO's operations are not related. These are 2 separate issues. And it seems like MIPO's operations are stagnant. It is because the mid-range ship market itself is stagnant. So this year, it's true that orders have declined to half of last year. It's because last year in 2024, so many mid-range ships were ordered. So mid-range ships around 157 mid-range ships were ordered last year. But in fact, the average number is around 48. So many orders placed last year. And now this year, the midrange about 36 mid-range vessels were ordered and 10 of them are for the Philly shipyard of [indiscernible]. So that's only 23% of 2024.

So the midrange, the market demand itself is sluggish. So it makes the situation look like Mipo is not really receiving orders. And about the feeder market, in H1, in the first half of this year, we have filled all our delivery capacities already. So we can deliver only after 2028. And these small ships, they are perceived as commodities, which means as their deadline is postponed, then their preference, they will lose their preferences and competitive edge as well. So it seems like order activity is stagnant. But again, I'd like to say the market itself is sluggish and stagnant.

The merger takes effect from the November 1 of this year, speaking of the merger between us and [indiscernible] of this year that the merger will take effect. But any change in revenue would be witnessed only after 2028. It's because the slots are already filled by 2027. So if it is for strategic orders targeting the United States, that will be referring to next-generation logistics vessels and strategic commercial ships. Even though we receive orders right now, these will be recognized as revenue only after 2028.

[Interpreted]

The following question will be presented by Han Young Soo from Samsung Securities.

[Interpreted]

I have 2 questions. The first question is about the proportion of profit, I would say, between Hyundai Heavy Industries and MIPO. And it seems like MIPO's profit margin has improved greatly. Initially, we were worried that this merger would rather dilute the overall profitability, but it seems like it's not the case, and this is highly encouraging. So when we look at the overall picture, my question is, the profitability of these 2 companies would converge to quite an equitable level? Or is it -- or is that Hyundai Heavy Industries margin would go up further and Mipo would maintain the current level of profitability. So the proportion of contribution, I would say, to the overall profitability between Mipo and Hyundai Heavy Industries that's my first question.

And my second question is about offshore structure because the order activities are being delayed, and we have worries that profitability may decline. So my question is until when should you engage in ordering activities so that it will eliminate any worries or concerns about the profit of offshore structure business.

[Interpreted]

To answer your first question, it's true that Mipo's OP margin has improved significantly to a close level to almost equal level of Hyundai Heavy Industries. But of course, Hyundai Heavy Industries would have a higher OP margin overall compared to Mipo. And in fact, the losses from offshore plant business was covered by engine business as the Hyundai Heavy Industries. As to the commercial ships, and actually, the LPG proportion is higher within Hyundai Heavy Industries. So overall margin would be higher within Hyundai Heavy Industries compared to Mipo. But I think next year, OP margin of both companies would rather converge to quite a similar level.

And as to the offshore structure business, our [indiscernible] project is accelerating and the [indiscernible] project has just begun. And we -- so if we continue with our ordering activities, until the first half of 2026, then at least on a revenue basis, we won't have declines happening. And in fact, biddings are mostly concentrated in the first half of next year. So you may look forward to this market.

And I'd like to make one correction. When I answered your first question, I mentioned LPG, but it's not LPG, but LNG. That's one correction that I'd like to make.

[Interpreted]

The last question will be presented by Oh [indiscernible] Daiwa Securities.

[Interpreted]

[Technical Difficulty]

[Interpreted]

Due to technical glitch, we couldn't really receive this question, and we would like to entertain one final question.

[Interpreted]

The final question will be presented by Lee DongHeon from Shinhan Investment Securities.

[Interpreted]

My first question is, I think your commercial business is experiencing quite rapid growth in revenue and sales. So my question is about the possibility of early delivery of your commercial ships. And the second question is as to your special ship business. When are you going to establish a cooperation or subsidiary in the United States?

[Interpreted]

As to your first question, as you said, starting from the second half of last year, 2024, the pace of revenue generation is really speeding up and being accelerated, and this is translated into early deliveries. So this year, we already have 10% to 15% acceleration. And this is, again, is translated into faster construction, and that would happen this year and next year as well.

As to our U.S. subsidiary, please wait and see and your patience would be greatly appreciated. We're making preparations. Previously, we told you that we are in the preparation phase. And now I hope we can share any updates that we make on our U.S. subsidiary as soon as we make proper preparation.

[Foreign Language].

[Statements in English on this transcript were spoken by an interpreter present on the live call.]