Hyundai E&C to double sales in 5 years

By Kim Tae-gyu

Staff Reporter

Hyundai Engineering & Construction, Korea's foremost builder by any measure, has gone down in history by spearheading the country's development in the construction industry since its establishment in 1947.

The Seoul-based outfit looks to continue to make history through more than doubling its revenue over the next five years based on brisk activities in overseas countries, according to its chief executive.

``We aim to garner upside of 10 trillion won ($8.2 billion) in sales this year for the first time in the domestic construction sector,'' Hyundai Construction President Kim Joong-kyum told The Korea Times in an interview earlier this week.

``By 2015, we strive to increase the figure to around 23 trillion won while reaching 2.2 trillion won in income for a near double-digit profit ratio of 9.5 percent. It is our five-year vision.''

Toward that end, Kim came up with a couple of strategies to expand into overseas markets in a more proactive way and focus on high-value engineering areas instead of low-margin construction projects.

``Currently, approximately half of our turnover comes from global businesses. Over the long haul, we look to crank up the proportion by up to 70 percent,'' said Kim who took the reins of the country's oldest builder in early 2009.

``In addition, we will concentrate on securing lucrative engineering bids while managing the overall projects including procurements. Along the same line, we may outsource the thin-margin physical construction work in foreign countries.''

Wildcat scheme?

Some pessimists claim that the five-year scheme sounds too ambitious because local construction companies are challenged by lacking new growth engines due to the inflated competition at a time when the real estate boom has tapered off.

Yet, most observers point out that the plans are plausible in consideration of Hyundai Construction's track record of remaining ahead of the pack during the past several decades.

``It is a tall task for a company the size of Hyundai Construction to double sales in just half a decade. The bottom line is how well the corporation will do in the global markets down the road,'' Woori Investment & Securities analyst Wayne Lee said.

``Hyundai has a knack in building infrastructure and power generators, a market which has yet to recover in a full-fledged manner in the aftermath of the economic downturn. If it secures sufficient contracts in those sectors, the 23 trillion won target isn't a wild-goose chase.''

Lee added that the other ammunition of Hyundai is its ability to nurture next-generation cash cows such as nuclear power plants, renewable energies, aquatic construction and offshore plants.

Indeed, Hyundai is one of the main players in Korea's winning the $20 billion project of establishing nuclear power plants in the United Arab Emirates, the largest energy deal in the Middle East reached last year.

KB Investment & Securities researcher Hu Moon-wook concurs.

``It is extremely difficult to predict the performance of a firm in five years. For Hyundai to achieve the goals, it would be required to raise its revenue from nuclear power plants as well as strengthen its foothold in engineering,'' Hu said.

New normal era & century housing

Kim majored in construction engineering at Korea University but the charismatic CEO is also famous for delving into humanities such as history, philosophy and literature.

With the belief that studies in humanities are necessary if the firm intends to expand its footing in offshore nations, the 60-year-old still avidly works on humanities, which are not so popular in Korea.

On the back of his knowledge in humanities, Kim tends to introduce the latest theories to the firm's employees or create ones on his own.

The latest one he set forth to Hyundai Construction workers is the so-called `new normal' hypothesis, generated by U.S. investor Roger McNamee in the early 2000s when the dot com bubble burst.

McNamee pointed out that the principles that prevailed during the Internet bubble would be replaced by fresh ones, or the ``new normal'' that is regarded as abnormal in the eyes of the 1990s Internet entrepreneurs.

``We are facing a paradigm shift caused by climate change or the fast aging society. In this juncture, we are attempting to set up our own new normal, which may not be understandable under previous perspectives,'' said the Hyundai lifer who got aboard the entity midway through 1976.

``For example, an increasing number of housewives may be forced to work outside if the low birthrates continue. Then, kitchens don't have to consume such a large space since people would more often dine out. Plus, houses may need the functionalities of offices in line with the trend of working from home.''

Century housing is a brainchild of Kim himself ― churning out a home, which will last for 100 years. While the frameworks will be there over a full century, residents will be able to redesign the interior or overhaul internal structures.

``In the future, housing costs may be more about operation rather than construction if policies such as collecting carbon taxes are launched. If so, today's ways of reconstructing apartments every 30 years would not be viable,'' Kim said.

``One of the plausible answers to deal with the problems in an eco-friendly era would be century housing. We jockey to commission reality checks with the idea in the not-so-distant future.''