42 percent of builders losing money
By Lee Hyo-sik
More than four out of every 10 construction firms here were found to have failed to make money in the first six months of the year, weighed down by the prolonged real estate market slump.
Most builders are expected to face an even bleaker outlook for the remainder of the year and beyond, with those focusing on the construction of apartments and other residential structures here facing growing risks of bankruptcy.
According to the Korea Exchange, Wednesday, 14 construction firms, or 42.4 percent of 33 listed on the local bourse, posted net losses during the January to June period.
Among 14 builders, Kumho Industrial, a construction arm of the troubled Kumho Asiana Group, recorded the largest net loss of 500 billion won in the first half, followed by Byucksan Engineering and Construction with 459.5 billion won and Samwhan Corp. at 185.1 billion won.
Of the 33, 19 were able to earn money in the first six months of the year. But only eight of them saw their operating income grow from the previous year.
``The domestic construction sector fell into a deeper slump in the first half of this year due to the continued depressed property market and declining overseas orders,’’ SK Securities analyst Park Hyung-ryul said.
He said a large number of small-and mid-sized builders went bankrupt in the first six months, adding business conditions will slightly improve in the following six months.
``But quite a number of companies heavily exposed to the domestic housing sector are expected to go bust in the latter half. But thanks to a rise in overseas orders from the Middle East in line with rising crude oil prices, large builders with extensive business networks abroad will perform better,’’ Park said.
According to Korea Ratings, more small and mid-sized construction firms are projected to apply for court receivership or go through a creditors-managed workout program in the second half, due to deteriorating financial conditions as a result of soured project financing loans.
About 20 of the top 100 builders here are currently undergoing a debt workout or are placed under court receivership.
Additionally, six out of Korea’s seven largest builders are expected to sustain a drop in operating earnings in the third quarter from a year earlier, according to online stock market Fn Guide.
Only Daewoo Engineering & Construction will likely earn 33.1 percent more during the July to September period, while Samsung Engineering and Daelim Industrial suffer a 4.8 percent and 8.9 percent decline in operating income, respectively.
Samsung Construction & Trading, Hyundai Engineering & Construction, GS Engineering & Construction and Hyundai Development are also forecast to post falling operating incomes.