Korean builders to ramp up overseas business in 2023

Major South Korean construction firms are set to expand their overseas business while reducing domestic projects this year to boost profitability. The companies are eyeing large-scale orders from emerging countries as they suffer from rising construction costs and the downturn of the local housing market.

Korea's five leading builders — Samsung Engineering Co., Hyundai Engineering & Construction Co., GS Engineering & Construction Co., Daewoo Engineering & Construction Co. and DL E&C Co. — are targeting a combined 27.4 trillion won ($21.4 billion) in overseas orders in 2023, the highest amount since 2015, according to a Hanwha Investment & Securities’ report on Feb. 13.

Hyundai E&C, a construction giant under Hyundai Motor Company, is aiming for 10.5 trillion won in new overseas orders this year, up 46.7% from last year. Samsung Engineering has set a goal of 8 trillion won in global deals, 38.5% more than it achieved last year.

GS E&C seeks to win 5 trillion won worth of overseas contracts this year, more than double the 2.3 trillion won it secured last year. DL E&C will increase annual global contracts to 2.1 trillion won this year, while Daewoo aims to achieve 1.8 trillion won in overseas projects, up 1.4% from last year.

The five firms’ combined target for domestic and overseas deals declined 6.2% to 82.3 trillion won this year, indicating that the companies will restructure their local businesses and ramp up their global ones.

SECTOR-FOCUSED APPROACH

Korean construction giants had focused on the global market until the early- to mid-2010s, enjoying strong cash flow from it. They returned to the domestic market as the housing market began to boom and provided less risk than large overseas projects.

The companies began to restructure their local residential property business last year due to rising construction costs and a frozen housing market. The number of unsold housing units in Korea reached 68,107 in December, exceeding the ‘dangerous’ level of 62,000 set by the land ministry.

Until a decade ago, Korean construction firms had touted their low prices to secure global projects. As they return to the overseas market, they are more sector- and region-focused and with deeper expertise than before, industry sources said.

Hyundai E&C is set to undertake some projects in Neom, a planned smart and eco-friendly city in Saudi Arabia, and expand railroad building in the Philippines. DL E&C is building chemical engineering plants in Malaysia and Indonesia.

GS E&C is stepping up its housing business with modular construction, a prefabricated building style that uses standardized components called modules to halve construction times. The firm is also expanding its seawater desalination business via GS Inima Environment SA, its Spain-based water treatment subsidiary.

Write to Eun-Jung Kim at kej@hankyung.com
Jihyun Kim edited this article.