By Kim Yoo-chul
A senior Samsung Group executive said Wednesday the group has no plan to combine its construction and engineering units.
Samsung has been realigning its entire business structure by merging affiliates with similar businesses. There have been rumors that Samsung C&T and Samsung Engineering will be merged.
“The rumors are not true,” Choi Chi-hoon, president and CEO at Samsung C&T, told reporters. “The group currently has no plan to restructure its construction business.”
Samsung C&T is now the second-biggest stakeholder of Samsung Engineering. The firm acquired the stake from Samsung SDI, the battery-making unit, in December.
The stake sale raised speculation that Samsung C&T may absorb the engineering unit, which has been suffering from falling profits amid the sluggish property market.
The ongoing drive by top Samsung management to restructure affiliates was mostly aimed at guaranteeing smoother power succession to Samsung Chairman Lee Kun-hee’s three scions ― Samsung Electronics Vice Chairman Lee Jay-yong, Hotel Shilla CEO Lee Boo-jin and senior Samsung executive and youngest daughter Lee Seo-hyun, officials said.
On top on the to-do list is a commitment to reduce its heavy reliance on Samsung Electronics, Samsung’s critical profit generator.
Under the initiative to create “another Samsung Electronics,” Samsung is putting more focus on key businesses.
Citing the moves, a Samsung official said it’s still likely that the construction-related business will be cut in terms of portion of business contribution to the conglomerate.
“It’s been clear that Samsung is looking to improve synergies by combining business affiliates within the same value chain,” he said in a brief interview inside the Samsung building.
Samsung C&T is not good in profits as the recovery of the local real estate market has yet to materialize. Also, Samsung Engineering reported 1.02 trillion won operating profit loss last year, said officials at the companies.
“That’s why the Samsung C&T CEO Choi shifted more resources to overseas business projects while scaling down some of its unprofitable local businesses,” said another Samsung official.
He said the construction business at Samsung Heavy Industries (SHI) will also be restructured. With Samsung C&T and Samsung Engineering, Samsung Everland and SHI are also getting involved in the construction business.
“Samsung C&T and Samsung Engineering are under serious situations. Although the C&T CEO Choi denied a possible merger plan with the group’s engineering unit, the acquisition will eventually come,” said Seong Ki-jong, an analyst at KDB Daewoo Securities, adding a portion of SHI’s construction division out of SHI’s total annual revenue remains a negligible 3.5 percent.
Samsung General Chemicals recently announced a plan to buy Samsung Petrochemical, while SDI also unveiled plans to purchase another of the group’s affiliates, Cheil Industries, which manufactures electronic materials and chemicals.