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Fri, January 22, 2021 | 15:15
Business
Overseas follies hit Korean builders
Posted : 2015-07-27 18:36
Updated : 2015-07-27 19:00
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By Park Si-soo

The long-running slump facing Korean builders can largely be blamed on their unprofitable overseas deals, analysts say.


Hyundai Engineering and Construction (E&C), Samsung C&T and other major builders have turned to overseas markets in recent years to make up for growing losses in the domestic market amid the economic downturn.

But they did so without thorough feasibility studies of foreign projects, which left the companies with huge losses.

For instance, Daelim Industrial has sustained huge losses because of an unprofitable deal to build a petrochemical plant in Saudi Arabia.

"Builders rushed to overseas markets to win projects, although they were presumed to be unprofitable," an industry insider said.

"They (builders) are now suffering from the fallout from their ill-prepared expansion."

Many projects are still under way and affecting builders poised to bounce back with the government's pump-priming policy.

Last week, Hyundai E&C, the nation's biggest builder, said its second-quarter operating profit fell 9 percent year-on-year to 254.3 billion won, while net profit dropped 8.2 percent to 144.1 billion won in the April-June period.

Samsung C&T also had a tough second-quarter with its operating profit plunging 47.9 percent year-on-year to 75.67 billion won and net profit tumbling 24.4 percent to 101.7 billion won from 134.54 billion won a year earlier.

SK E&C, which was hit by overseas losses, reported a 493 billion won net loss in 2013 and 177.7 billion won in 2014, with its debt-to-equity ratio soaring to 331.9 percent at the end of last year.

Analysts say Korean builders will find the going tough for a while yet.

"As overseas orders remained below sales for the second consecutive year, the building industry is projected to suffer a slowdown in growth until next year," a Hana Daetoo Securities analyst said.

Emailpss@koreatimes.co.kr Article ListMore articles by this reporter









 
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