No new shocks in Q2 builder data

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No new shocks in Q2 builder data

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Korea’s major builders’ second-quarter performance shows they are still struggling, although some companies have shown signs of promise.

Hyundai Engineering and Construction, the nation’s largest builder, said last week its second-quarter sales jumped 9.1 percent year-on-year to 3.47 trillion won ($3.1 billion), while operating profit climbed 27.4 percent to 200.7 billion won. Net profit was 129.9 billion won, up 9.7 percent.

The construction affiliate of Hyundai Motor Group was the only top five company to see an increase in operating profit and net profit.

Samsung C&T saw its engineering and construction group’s sales increase 47.2 percent year-on-year to 3.18 trillion won thanks to overseas orders, but operating profit dropped 22.3 percent to 85.4 billion won.

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The company’s overall second-quarter performance showed operating profit of 99.3 billion won, down 28 percent from a year ago, and net profit of 116 billion won, a 56.1 percent drop.

“Samsung C&T’s revenue growth is assured by overseas orders, but the problem is whether it can make profits with those projects,” said Park Joong-sun, an analyst at Kiwoom Securities.

Daewoo E&C said it had second -quarter revenue of 2.3 trillion won for 5.4 percent year-on-year growth, and operating profit of 108 billion won, a 26.8 percent increase. However, net profit shrunk 31.8 percent year-on-year to 52.1 billion won because disrupted projects.

Daelim Industrial posted sales of 2.4 trillion won, up 0.2 percent year-on-year, and operating profit of 111.7 billion won, down 10.64 percent from. However, net profit increased 98.3 percent to 76.9 billion won.

GS E&C and Samsung Engineering again reported losses in the second quarter, but analysts said they weren’t as shocking as in the previous quarter.

GS E&C, the nation’s fourth-largest builder, had sales of 2.28 trillion won and an operating loss of 150.3 billion won. The second-quarter revenue was down 3 percent compared to year ago, but a 34 percent improvement from the disastrous first quarter. Operating losses also shrunk more than 385 billion won compared to the first quarter loss of 535.5 billion won.

Samsung Engineering posted 88.7 billion won in operating losses in the second quarter, which was an improvement from 219.7 billion won in the first quarter. Analysts had previously predicted the company would have 50 billion won in operating profit.

Since the shocking first quarter losses, the company has been receiving special inspection from Samsung Group regarding the overseas business and financial stability. Samsung Engineering said the second quarter performance also reflected the potential risk of overseas projects.

“The second-quarter performance [of construction firms] can be summarized as relief from shock,” Lee Kyung-ja, an analyst at Korea Investment & Securities, said in her report. “While builders have coped with malignant projects, they have lessened the losses and either met with the market expectation or performed slightly below.”


BY JOO KYUNG-DON [kjoo@joongang.co.kr]

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