By Jane Han
Staff Reporter
Being a top 10 builder in Korea once meant solid financial underpinnings, years worth of backed up orders and a well-grounded status, but the latest economic crunch is now threatening the existing order.
Recent earnings reports indicate that even the top 10 players, particularly the latter five, aren't safe from the overall plunge in the construction market, as poor domestic apartment sales and overseas orders under below-market prices are hurting their bottom lines.
``We're starting to see many of the top firms wobble because the extended property market slump here is driving their businesses to the limit,'' said Kim Eun-tae, an official at the Construction Association of Korea.
Daewoo Engineering & Construction, which is well known for its apartment brand ``Prugio,'' is one of the top-tier builders that saw tumbling sales last year.
Its operating profit nose-dived almost 40 percent in 2008 to 344 billion won compared to the previous year. Together with Daewoo, Daelim Industrial and GS Engineering & Construction ― both leading apartment builders ― have been the so-called three biggest losers from tanking apartment sales.
The latest government data shows that the number of unsold new homes jumped to a record high in November of last year, jumping from 155,720 units at the end of October to 162,750 units. The Ministry of Land, Transport, and Maritime Affairs said the November figure was the highest since the government started collecting data in 1993.
Daewoo, Daelim and GS are still coasting on the safe side, however, compared to firms like POSCO Engineering & Construction and Doosan Construction, which have seen their operating profits dip by 20 percent.
``Other than the No. 1 and 2 players, we used to see the remaining top eight or nine firms competing with neck-and-neck sales, but the race is going to get narrower,'' said Kim.
Companies such as Hyundai Engineering & Construction, GS E&C and Samsung C&T, which have long been ramping up their overseas portfolio, are going to lead the pack, according to industry experts.
Hyundai E&C posted an operating profit of 480 billion won last year, up 33 percent year-on-year, backed by new overseas orders scattered across the Middle East.
``Polarization is going to worsen because as long as the domestic real estate market remains slow, the firms capable of snatching up big overseas orders are going to widen the gap with their competitors,'' said Kim Tae-yeop, head of the overseas construction division at the International Contractors Association of Korea.
The government is set to complete by the end of this month its second round of restructuring aimed at weeding out unviable builders and shipyards.