Contract hailed as harbinger of market recovery
By Park Si-soo
A consortium of five Korean builders struck a $5.3 billion construction deal in Kuwait, sources said Friday.
They are Daewoo Engineering and Construction (E&C), Hyundai E&C, Hyundai Heavy Industries, SK E&C and Hanwha E&C.
These companies will jointly build a major section of a giant oil refining plant in the Middle East nation over a period of 45 months. The plant, when completed, will refine up to 615,000 barrels of oil per day, making it the world's second-largest in refining capacity.
Hyundai E&C will be paid 40 percent of the contract, or $600 million. SK will receive 30 percent, or $450 million, and the others will share the rest.
"This is good news coming at a time when Korean builders are suffering from long-running financial difficulties," said an official of the International Contractors Association of Korea. "Construction orders from the Middle East have reduced significantly in the wake of artificially lowered oil prices. I hope this deal will be a harbinger of market revitalization."
Korean builders have suffered from deteriorating financial health in recent years, which can be blamed on their unprofitable overseas deals.
They are believed to have pursued ill-prepared overseas expansion, which left the companies with huge losses.
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.
The company has also been facing a setback because of its fight against U.S. hedge fund Elliot Associates in its bid to merge with Cheil Industries. Though it beat the fund at a shareholders' meeting about the merger, its share prices continued to slide.
SK E&C 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.
By Park Si-soo
A consortium of five Korean builders struck a $5.3 billion construction deal in Kuwait, sources said Friday.
They are Daewoo Engineering and Construction (E&C), Hyundai E&C, Hyundai Heavy Industries, SK E&C and Hanwha E&C.
These companies will jointly build a major section of a giant oil refining plant in the Middle East nation over a period of 45 months. The plant, when completed, will refine up to 615,000 barrels of oil per day, making it the world's second-largest in refining capacity.
Hyundai E&C will be paid 40 percent of the contract, or $600 million. SK will receive 30 percent, or $450 million, and the others will share the rest.
"This is good news coming at a time when Korean builders are suffering from long-running financial difficulties," said an official of the International Contractors Association of Korea. "Construction orders from the Middle East have reduced significantly in the wake of artificially lowered oil prices. I hope this deal will be a harbinger of market revitalization."
Korean builders have suffered from deteriorating financial health in recent years, which can be blamed on their unprofitable overseas deals.
They are believed to have pursued ill-prepared overseas expansion, which left the companies with huge losses.
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.
The company has also been facing a setback because of its fight against U.S. hedge fund Elliot Associates in its bid to merge with Cheil Industries. Though it beat the fund at a shareholders' meeting about the merger, its share prices continued to slide.
SK E&C 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.
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