Construction Companies Hit by COVID-19 See Increase in New Orders

[Asia Economy Reporter Yoo In-ho] The prolonged COVID-19 pandemic is beginning to significantly impact the performance of major domestic construction companies.

Construction companies with a high proportion of overseas projects are facing emergencies due to deteriorating sales and operating profits. On the other hand, companies with a relatively high proportion of domestic projects and those diversifying their businesses have posted relatively favorable results. However, the overall increase in new orders, which are future growth drivers, is viewed positively.

◆ Performance shaken by COVID-19 = According to industry sources on the 3rd, the prolonged COVID-19 situation has caused delays in overseas construction site progress and increased costs, lowering the profitability of major construction companies. Hyundai Engineering & Construction, the industry leader, saw its sales decrease by 1.1% year-on-year, but its operating profit shrank by 41.5% to 139.8 billion KRW. While the domestic housing business remained strong, losses from overseas site costs were preemptively reflected, pulling down overall performance.

Daewoo Engineering & Construction also recorded poor results due to delays in overseas construction and domestic sales projects. Both sales and operating profit fell by 8.9% and 13.5%, respectively, compared to the same period last year.

Samsung C&T Construction Division's sales increased by 9.2% year-on-year, but operating profit decreased by 12.7%. Although overseas construction resumed, costs also increased, leading to higher expenses.

Conversely, some construction companies improved their performance through new businesses. GS Engineering & Construction's consolidated sales for the third quarter this year were 2.32 trillion KRW, down 5.0% year-on-year, but operating profit rose 6.4% to 210 billion KRW. Although the scale shrank, the housing sector and new businesses posted favorable results.

In fact, the company's gross profit margin in the building and housing sector increased by 6.8% year-on-year to 23.5%. The performance of the global modular companies acquired this year, Poland's Danwood and UK's Elements Europe, was also fully reflected.

HDC Hyundai Development Company maintained solid performance in the third quarter following the second quarter. Sales decreased by 6.7% year-on-year to 812.5 billion KRW, reflecting the base effect of sluggish new sales last year, but operating profit surged 42.7% to 132.5 billion KRW.

Major in-house projects such as Daejeon I-Park City and Suwon Yeongtong I-Park Castle Phase 3 performed well, resulting in an industry-leading operating profit margin of 16.3%.

Daelim Industrial is also evaluated as having performed well, being the only one among the six listed major construction companies to see both sales and operating profit rise. Sales and operating profit were recorded at 2.2219 trillion KRW and 249.6 billion KRW, respectively, up 2.7% and 11.9% from last year.

◆ Bright outlook for securing new business = The industry views the fact that all major construction companies increased their newly secured orders through the third quarter compared to the same period last year as a positive factor.

Hyundai Engineering & Construction secured the largest amount of new orders this year, with 21.8921 trillion KRW worth of projects secured by the third quarter. This is a 22.7% increase from 17.8444 trillion KRW in the same period last year. Daewoo Engineering & Construction's cumulative orders this year reached 8.4745 trillion KRW, up 14.2% from 7.4226 trillion KRW in the previous year.

GS Engineering & Construction also secured 7.513 trillion KRW, increasing orders by 13.3% compared to the same period last year.

Additionally, Samsung C&T recorded a 48.8% increase to 6.538 trillion KRW, and Daelim Industrial saw a 118.8% rise to 6.8425 trillion KRW in new orders, indicating that major construction companies have significantly expanded their medium- to long-term order backlog.

The expansion of new orders is largely influenced by the strong housing sector due to soaring housing prices. GS Engineering & Construction's housing sector accounted for 5.134 trillion KRW, or 68% of its new orders this year.

This volume is nearly double that of last year. Daelim Industrial's housing new orders amounted to 4.3895 trillion KRW, making up 64% of the total. Samsung C&T's building business, which includes housing projects, accounted for 75% of its new orders.

Daewoo Engineering & Construction also had more than half (59%) of its new orders in housing and construction. Hyundai Engineering & Construction's building and housing sector accounted for 47%, doubling from 24% in the same period last year.

Lee Eun-hyung, senior researcher at the Korea Construction Policy Research Institute, forecasted, "Major construction companies are expected to see improvements in sales and operating profit next year based on their order backlog."

This content was produced with the assistance of AI translation services.