The sales figures for the top 10 construction companies in the country in the first quarter of this year decreased compared to last year. It is analyzed that the decline in sales in the dwellings construction sector greatly impacted this.
Daewoo E&C, DL E&C, and HDC Hyundai Development Company saw revenue improve by about 30%, while Samsung C&T's construction division and Hyundai E&C's profitability fell back.
According to the Financial Supervisory Service's electronic disclosure system on the 9th, Samsung C&T, Hyundai E&C, Daewoo E&C, DL E&C, GS Engineering and Construction, and HDC Hyundai Development Company each announced their preliminary results for the first quarter of this year.
Analysis of the consolidated results of six listed construction companies among the top 10 based on the Ministry of Land, Infrastructure and Transport's construction capability evaluation last year showed that all construction companies saw a decline in sales compared to the first quarter of last year.
The consolidated sales of Samsung C&T's construction division, which ranks first in construction capacity evaluation, reached 3.62 trillion won in the first quarter of this year, a decrease of 35% compared to the previous year. Second-ranked Hyundai E&C also saw its sales decrease by 12.8% to 8.5453 trillion won.
Daewoo E&C and DL E&C recorded revenue decreases of 16.5% and 4.4%, respectively, with sales figures of 2.4873 trillion won and 1.895 trillion won. HDC Hyundai Development Company also experienced a 5.2% decrease in revenue to 905.7 billion won compared to the previous year.
The backdrop for the sales decline of all top 10 construction companies is analyzed as being primarily due to rising construction costs, such as construction materials and labor costs, along with a decline in the volume of new constructions due to a sluggish real estate market, which reduced sales in the dwellings construction sector.
The top 10 construction companies had mixed first-quarter results in terms of profitability. Samsung C&T's construction division and Hyundai E&C recorded operating profits of 159 billion won and 213.7 billion won, respectively, which were decreases of 52.8% and 14.8% compared to the first quarter of last year.
In contrast, Daewoo E&C, DL E&C, and HDC Hyundai Development Company saw their operating profits increase by around 30%. GS Engineering and Construction's operating profit decreased by 0.2%, maintaining a similar level to the previous year.
Samsung C&T's construction division's operating profit dropped by more than half due to the completion of high-tech projects and large overseas plant constructions. Hyundai E&C experienced reduced operating profit as it dealt with constructions of high-cost dwellings that commenced in 2021, amid sharply rising construction costs.
For Daewoo E&C, DL E&C, and HDC Hyundai Development Company, improved profitability was due to a base effect from significantly decreased results in the first quarter of last year compared to 2023.
DL E&C's operating profit in the first quarter of last year declined by more than 30% compared to the previous year, and Daewoo E&C recorded a 35% decrease in operating profit compared to the first quarter of 2023. HDC Hyundai Development Company also saw its operating profit drop by more than 10% compared to the first quarter of last year.
Daewoo E&C recorded an operating profit of 151.3 billion won in the first quarter of this year, an increase of 31.6% compared to last year. DL E&C's profit also rose to 81 billion won, up 33.0%, while HDC Hyundai Development Company saw an increase of 29.8% to 54 billion won compared to the previous year.
Jang Yoon-seok, a researcher at Yuanta Securities Korea, analyzed, "For construction companies engaged in the dwellings business, the completion of high-cost projects that started in 2021 has progressed, leading to a decrease in overall sales and the reflection of additional expenses, resulting in a drop in profits."
Yook Seong-hoon, a senior researcher at Nice Credit Rating's Corporate Evaluation Division, noted, "Recently, additional costs have been reflected in projects outside dwellings, such as civil engineering, leading to a continuing trend of declining profitability," and added, "While new orders can secure a certain level of profitability reflecting the increase in construction costs, considering the sales contraction due to the decline in construction volume and the increase in risk of unsold inventory, low profitability is expected to persist in the medium to short term."