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Wednesday, January 29th, 2014
SEOUL, KOREA - Construction companies are announcing depressingly low earnings performances for the fourth quarter last year. On January 28, Daewoo Engineering & Construction said in a regulatory filing that it took an operating loss of 445 billion won in the fourth quarter.
For the whole year of 2013, the company's operating loss was 199.9 billion won. The earnings shock-like performance for the fourth quarter was largely due to the fact that the company reflected losses from domestic projects that went sour.
Earlier, Daelim Industrial also revealed that its fourth-quarter operating profit was a deficit of 319.6 billion won, owing to cost overruns in overseas sites including those in Saudi Arabia and Kuwait. Immediately afterward, the company's share price has declined more than 4 percent for two consecutive trading days.
In the same way, Hyundai Engineering & Construction reported that its quarterly earnings were a surplus of 207.5 billion won, much lower than the market consensus as the contractor reflected the cost overruns from overseas projects. As for GS Engineering & Construction that has not yet announced its fourth-quarter earnings, analysts predicted it too would report disappointing results because of the below-cost competition for overseas construction orders in the past.
Lim Jeong-min, Woori Investment & Securities analyst, said, "If the biggest problem for construction contractors last year was below-cost order competition among fellow Korean builders in the Middle East that depressed their profitability, this year will offer so many more problems for them from bad investments in domestic housing projects. It will be hard for the real estate market to rebound within this year."
