The construction industry has seen contrasting fortunes for Samsung C&T's construction division and Hyundai E&C since the beginning of the year. Samsung C&T recorded over 1 trillion won in operating profit for the second consecutive year and secured the construction rights for the redevelopment of the 'Hannam 4 District.' In contrast, Hyundai E&C reported its largest-ever operating loss and was significantly outvoted by Samsung C&T in the 'Hannam 4 District' project. The industry is closely watching what results the two companies will achieve in the remaining order competition this year.
According to the construction industry on the 24th, Samsung C&T announced the previous day that it recorded an operating profit of 1 trillion 10 billion won last year. Although this represents a decrease of 3.2% compared to the previous year, it has been regarded as a strong performance as it exceeded 1 trillion won for the second consecutive year.
On the other hand, Hyundai E&C reported an operating loss of 1 trillion 220.9 billion won last year. This was due to losses of around 1 trillion won recorded in its overseas plant business by Hyundai Engineering. Hyundai Engineering suffered delays in the completion of projects, including the Balikpapan oil refinery in Indonesia and the Jafurah gas plant in Saudi Arabia. This marks the first annual operating loss for Hyundai E&C in 23 years since 2001. Hyundai E&C has set a goal of achieving an operating profit of 1 trillion 182.8 billion won this year.
In the credit rating sector, there are indications that Hyundai E&C and Hyundai Engineering's rating outlook may be downgraded or revised downward. Korea Ratings maintained Hyundai Engineering's corporate credit rating at AA- on the day of the announcement but revised the outlook from stable to negative, reflecting significant losses related to overseas plants in the fourth quarter of last year. NICE Investors Service also kept Hyundai Engineering's long-term credit rating at AA- on the same day but placed it on 'downward review' monitoring. Korea Ratings released an evaluation report regarding Hyundai E&C's substantial loss announcement and noted, 'We plan to comprehensively review the level of financial resilience going forward and reflect that in the credit rating.'
Park Sera, a research institute at Shinyoung Securities, said, 'The cost rate in overseas projects is crucial for improving Hyundai Engineering's performance,' adding, 'While reflecting the operating costs for the fourth quarter, we need to observe the trends since the completion is not yet finalized and uncertainties exist in other overseas sites.'
Samsung C&T and Hyundai E&C engaged in a fierce 'order battle' over the redevelopment project of the Hannam 4 District at the beginning of this year. Samsung C&T ultimately won the construction rights. The project has an estimated cost of 1.6 trillion won, making it a focal point in the competitive bidding for the first half of the year. What caught the industry's attention was the 'overwhelming margin of votes' during the voting at the general meeting, where 1,026 members participated; Samsung C&T received 675 votes, while Hyundai E&C garnered 335 votes. Hyundai E&C has been recognized as a leader in urban renewal projects, maintaining first place for six consecutive years.
'Up until the general meeting, there was uncertainty about which construction company would win the construction rights,' a source from a large construction firm noted. 'The fact that Hyundai E&C had already secured the Hannam 3 District project and that Samsung C&T promised significant financial support, such as deferring up to four years for shared expenses, proved effective.'
Samsung C&T is showing signs of reclaiming its former status five years after re-entering the remodeling market. Since 2015, Samsung C&T has not secured any housing contracts until 2019. The last contract was for the redevelopment of the Shinbanpo 3rd complex and Kyungnam Apartments (Raemian One-Bailey). At that time, rumors circulated that Samsung C&T would withdraw or sell its housing division. Although Samsung C&T's official position was that it would 'refrain from new contracts considering profitability,' the rumors of withdrawal did not cease.
In April 2017, Samsung C&T seemed to be making a comeback by appearing in redevelopment projects such as Banpo Jugong Complex 1 (1st, 2nd, and 4th districts) and Seocho Sindonga. However, as fierce competition among construction companies ensued for these redevelopment projects, Samsung C&T withdrew at the last moment, advocating 'clean bidding.' The official stance at that time was, 'We will not engage in wasteful competition.'
However, in April 2020, Samsung C&T officially declared its 'return of Raemian' by winning successive contracts for the Shinbanpo 15th complex (Raemian One Pentas) and the Banpo Jugong Complex 1, 3rd neighborhood (Raemian Trinione) in May. Samsung C&T has been increasing its housing construction performance with figures of ▲1 trillion 487 billion won in 2020 ▲911.7 billion won in 2021 ▲1 trillion 868.6 billion won in 2022 ▲2 trillion 951 billion won in 2023 ▲3 trillion 639.8 billion won in 2024. Samsung C&T has set a target of 5 trillion won for this year's remodeling project orders. The company is considering participating in bids for the redevelopment of Gaepo Jugong Complexes 6 and 7, Jamshil Wuseong Complexes 1, 2, and 3, the Apgujeong area, and the Daekyo Apartment complex in Yeouido.
Samsung C&T and Hyundai E&C are expected to compete once again in the redevelopment project of Gaepo Jugong Complexes 6 and 7. The bidding deadline for this apartment complex is approaching on March 12. The industry anticipates that Hyundai E&C will compete fiercely for remaining large project orders, especially after losing in the 'Hannam 4 District' project.
Lee Tae-hwan, a research institute member at Daishin Securities, said, 'Hyundai E&C set an operating profit target of 1 trillion 200 billion won for this year's consolidated results,' adding, 'Since the expectations have risen, we need to confirm that we are on a recovery trajectory starting from the first quarter.'