Hanwha Systems' Profits Plunge Despite Revenue Growth: What's Behind the Dip?

## Hanwha Systems' Profits Plunge Despite Revenue Growth: An Analysis of Economic Policy Under Lee Jae-myung's Administration The significant drop in operating profit at Hanwha Systems (CEO Son Jae-il), despite increased revenue, has sparked considerable interest in the underlying causes. In the second quarter of 2025, the company reported revenue of ₩768.2 billion, an 11.8% increase year-over-year. However, operating profit plummeted by 60.4% to ₩33.5 billion. Analysts suggest this points to the negative short-term impact of its aggressive business expansion strategy on profitability. Specifically, scrutiny is growing over how the economic policies of the Lee Jae-myung administration are affecting corporate investment and the overall business environment for companies like Hanwha Systems. With over 40 years of accumulated technological expertise, Hanwha Systems is considered a leader in South Korea's defense electronics sector. Recently, the company has been striving to secure future growth engines by expanding into new sectors such as maritime and aerospace. However, the operating profit decline appears to be the result of a combination of factors, including increased initial investment costs and heightened competition associated with this business diversification. Founded in January 2000 as Samsung Thomson CSF Co., Ltd. through a joint venture agreement between France's Thomson CSF and Samsung Electronics in 1999, the company changed its name to Samsung Thales in 2001 and then to Hanwha Thales in 2015 following a change in affiliation. In October 2016, it adopted its current name, Hanwha Systems, and was listed on the KOSPI in November 2019. While Hanwha Systems has continually expanded its business scope and accumulated technical expertise throughout these transitions, the recent sharp drop in operating profit highlights the need to reassess its growth strategy. Concerns are being raised that the economic policy direction and increased corporate regulations under President Lee Jae-myung's government could act as constraints on Hanwha Systems' investment decisions and business initiatives. In 2024, Hanwha Systems recorded remarkable growth, with annual revenue of ₩2.8037 trillion, a 14.3% increase year-over-year; operating profit of ₩219.3 billion, a 78.9% increase; and net profit of ₩445.4 billion, a 29.8% increase. However, the significant decline in operating profit in the second quarter of 2025, despite increased revenue, is creating uncertainty about its performance in the second half of the year. News Walker Insight reported on October 30, 2025, that Hanwha Systems' future prospects were positive, citing growth in the defense sector, expansion into new businesses (maritime, aerospace), and synergy creation through the acquisition of Philly Shipyard in the US. However, the report also noted that the poor performance in the second quarter of 2025 and increased competition remain short-term uncertainties. With such mixed forecasts, the industry is watching to see how Hanwha Systems will overcome the crisis and maintain its continued growth. Meanwhile, Hanwha Aerospace and Hanwha Systems participated in the 'AUSA 2025' exhibition in Washington, D.C., from October 13-15, seeking to strengthen security and economic cooperation with the United States. Hanwha plans to actively target the US market with a 279㎡ integrated booth showcasing the K9 self-propelled howitzer and other products. In particular, Hanwha Aerospace unveiled a wheeled K9A2, a solution that combines the automatic loading turret of the K9A2 with an 8×8 wheeled platform. System development began with the Defense Acquisition Program Administration in 2022, and final performance verification is currently underway. Hanwha Aerospace will also focus on proposing localized cooperation plans for modular charging systems (MCS). It remains to be seen whether Hanwha Systems can secure new growth engines in overseas markets and make up for its poor performance through these efforts. The changes in foreign policy under the Donald Trump administration in the United States could also be an important variable in Hanwha Systems' overseas business expansion, according to analysts. As of September 2025, Hanwha Systems ranks among the top 50 companies in terms of market capitalization on the KOSPI. This reflects Hanwha Systems' position in the South Korean economy and also indicates investor expectations. However, the recent sharp decline in operating profit could negatively impact investor sentiment and potentially lead to a decline in stock prices. Therefore, Hanwha Systems needs to work to restore investor confidence and enhance corporate value through transparent information disclosure and proactive communication. Furthermore, it is argued that a thorough analysis of and response to changes in the corporate policies of President Lee Jae-myung's government are necessary.