Raw materials, war, Corona 19… ‘Nightmare’ in 2021 [건설사]

Last year, construction companies showed overall growth in the construction and housing sector, as demand increased along with the rise in real estate values. However, there were differences in business areas such as plants and infrastructure. Amid global uncertainty due to COVID-19, Hyundai E&C and Daewoo E&C, which excelled in the plant sector, grew thanks to the performance of the housing business, while GS E&C, which did not grow, declined.

Samsung C&T recorded 21,120.591 trillion won in sales last year, up 10.6% from 19.888 billion won in the previous year. Operating profit was 249.274 billion won, down 10.4% from the previous year, but net profit was 1.916.891 trillion won, up 498.6% from 32.23 billion won last year.

However, this growth was driven by brisk trading and bio divisions, and the construction division showed negative growth compared to the previous year. Construction sales decreased 6.1% from the previous year to KRW 10,988.9 billion, and operating profit was KRW 251.4 billion, down 52.7% from the previous year.

A Samsung C&T official said, “The main reason for the decrease in operating profit is an increase in SG&A expenses due to a fall in the profit and loss of some projects and an increase in labor costs. We will promote profitable growth by keeping the safety and compliance principles at the highest level,” he said.

Hyundai E&C recorded 18.655 trillion won in sales last year on a consolidated basis, up 6.5 percent from 16.97 trillion won in the previous year. Operating profit was 753.54 billion won, up 37.3% from the previous year, and net profit was 554.377 billion won, up 143.5% from the previous year. However, non-operating factors such as an increase in financial income, a decrease in financial expenses, and a decrease in other expenses had an effect on net income.

It is analyzed that the increase in sales last year was driven by the domestic construction and housing business. Domestic business sales in the construction and housing sector increased by more than 1 trillion won to 8,921.791 trillion won from 7.86 trillion 79 trillion won in the previous year. As a result, the proportion of sales in the business division increased from 45.8% of total sales last year to 48.6% last year.

An official of Hyundai E&C said, “Sales grew due to solid performance in the domestic housing sector and overseas plant construction in earnest, such as the Marjan gas processing plant in Saudi Arabia and the construction of the refinery upgrade facility in Basra, Iraq. We have secured a job that exceeds four years’ worth, and we will secure future core competitiveness through new energy conversion businesses such as small module nuclear power plants (SMR) and hydrogen plants.”

GS E&C’s sales last year amounted to 7.79 trillion won, down 12.3 percent from 8,890.9 trillion won in the previous year. Operating profit also decreased by 24.6% to KRW 514.791 billion, and net profit also decreased by 3% to KRW 249.473 billion.

GS E&C’s plant division recorded -53% from 2.75 trillion won in the previous year to 1.29 trillion won last year, despite the fact that the sales of the building and housing sector increased 5% to 6.91.2 trillion won from 5.803.8 billion won in the previous year. It is analyzed that the sluggishness of the infrastructure sector and sales, operating profit, and net profit were negatively affected.

An official from GS E&C said, “Sales and operating profit decreased as existing large-scale projects entered the finishing stage.”

He continued, “The amount of orders received in the construction and housing sector last year was KRW 8,558.9 billion, and this year, it is expected to achieve KRW 7.6 trillion in orders through pre-contracted and new orders. We are planning to supply female households, so we have built a diverse portfolio, not only in the metropolitan area but also in excellent local businesses.”

▲Construction company performance in 2020 and 2021 (unit: KRW million).