Daewoo profits continue to slide

Daewoo Engineering & Construction Co., Korea’s largest contractor, said second-quarter profits fell 11 percent, the fourth three-month decline, because of the absence of disposal gains and accounting for overseas assets.
Net income dropped to 124.4 billion won ($136 million) from 139.1 billion won a year earlier, the company said in a regulatory filing yesterday. Sales rose 8.5 percent to 1.59 trillion won. Shares of Daewoo Engineering, 72 percent owned by Kumho-Asiana Group, dropped as much as 1.8 percent to 29,500 won yesterday in Seoul.
Its profitability narrowed as costs increased for new overseas projects in countries such as Qatar. Orders for Korean companies from the Middle East will probably rise to a record $20 billion this year as rising oil revenue prompts spending on refineries and power stations.
Operating profit, or sales minus the cost of goods sold and administrative expenses, fell 10 percent to 157.9 billion won in the April to June period. The measure would have risen by 15 percent, if not for the disposal last year, the company said. This month’s sale of the company’s head office for 960 billion won will generate a one-time gain in the fourth quarter, Daewoo Engineering said.
Accounting for the value of overseas assets also eroded earnings this year since the company calculates gains or losses based on changes in the value of the won at the end of the quarter compared with the end of the previous quarter, Daewoo Engineering said.
The company received 4.66 trillion won worth of new orders in the first half of this year, 12 percent less than a year earlier, the company said. The backlog increased 2.8 percent from the end of the first quarter to 23.11 trillion won by June 30, which represents almost four years of work.
New contracts announced in the second quarter include an $846.8 million order to build two combined-cycle power plants for General Electricity Co. of Libya. Bloomberg