Listed builders post net losses

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Listed builders post net losses

Listed construction firms’ net profit swung into the red last year, posting a net loss of 1.47 trillion won ($1.31 billion), compared to 868.6 billion won of net profit in 2011, as demand for the industry plunged significantly due to the sector’s prolonged downturn since the 2008 financial crisis, according to local financial information provider FnGuide yesterday.

It said 30 out of 62 builders listed on the Korean bourse saw a net loss and 23 of them have been in the red for two consecutive years.

The data showed Dongbu Corporation, the construction arm of Dongbu Group, posted a 3.9 billion won loss last year, on top of a 151.1 billion won loss posted in 2011.

Whereas Korean builders’ revenue grew 10.6 percent to 114.8 trillion won last year, its operating profit shed 36.6 percent year-on-year to 1.67 trillion won.

Market observers suggest the pain that small- and medium-size businesses are suffering from since the economic downturn is greater than large companies that have managed to overcome the sluggish economy by winning overseas orders.

According to the Ministry of Land, Infrastructure and Transport’s statistics, Korean builders’ overseas orders have continued to climb for six straight years.

They won a combined $64.9 billion worth of overseas construction projects in 2012, up 9.7 percent from the $59.1 billion they won in 2011.

“The ministry estimated Korean builders will ink up to 75 billion won worth of construction deals internationally this year by winning more orders in the Middle East and Asia, but most of these orders are dominated by big builders and the pain for smaller companies like us is greater,” said Kim, a 54-year old construction firm owner in Gyeonggi.

Market observers said many builders are counting on the April 1 real estate stimulus measure developed by the Park Geun-hye administration this week, as they believe the construction industry will recover when real estate trading normalizes.

The Park government said first-time home buyers will be eligible for full exemption from acquisition tax and increased financial support if they make purchases this year.

Households that earn 60 million won or less a year will be exempted from paying the acquisition tax when they buy residences smaller than 85 square meters (914.93 square feet) and less than 600 million won in price until the end of the year.

“The ultimate goal of the government’s real estate stimulus package is to invigorate the frozen housing market,” said Kim Hyung-gun, an analyst at Meritz Securities.



By Kim Mi-ju [mijukim@joongang.co.kr]

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