[비즈한국] Amid a construction industry mired in a slump due to the real estate downturn and rising raw material costs, it has been confirmed that the order backlogs of the five major listed construction companies have decreased by approximately 10 trillion won compared to the same period last year. The decline in order backlogs was more pronounced overseas than domestically. Construction firms appear to be preparing for the 'construction industry chill' by selectively bidding on high-profit projects.
An analysis by BizHankook of the third-quarter reports from Korea's five major listed construction companies—Samsung C&T028260 (Construction Division), Hyundai E&C000720, Daewoo E&C047040, DL E&C375500, and GS E&C006360—shows that the total consolidated order backlog for the third quarter of this year stood at 240.8335 trillion won, a decrease of 10.4276 trillion won (4%) compared to the same period last year. An order backlog represents the value of projects that have been contracted but not yet delivered, and it is typically recognized as a company's future revenue. Essentially, the storehouse of future work is emptying.
Three out of the five major listed construction companies saw their order backlogs shrink over the past year. By company, Samsung C&T’s backlog fell by 5.1757 trillion won (18%) to 23.5877 trillion won, Hyundai E&C’s by 6.1073 trillion won (7%) to 86.5904 trillion won, and Daewoo E&C’s by 767.8 billion won (2%) to 44.7777 trillion won. Conversely, the order backlogs for DL E&C and GS E&C increased to 29.1493 trillion won and 56.7284 trillion won, respectively, up by 219.6 billion won (1%) and 1.4036 trillion won (3%). GS E&C, which saw a significant increase in its order backlog, was the only one among the top five to raise its annual order target earlier this year.
The decline in order backlogs was particularly notable in overseas projects. The combined overseas order backlog for the top five companies dropped from 68.0474 trillion won in the third quarter of last year to 62.7652 trillion won in the third quarter of this year, a decrease of 5.2822 trillion won (8%) in one year. Samsung C&T’s overseas backlog plummeted by 4.9310 trillion won (31%) compared to the same period last year, while Hyundai E&C and Daewoo E&C saw decreases of 3.4641 trillion won (13%) and 1.8853 trillion won (25%), respectively. Conversely, DL E&C and GS E&C, whose total backlogs increased, saw their overseas order backlogs grow by 700.3 billion won (+34%) and 4.2978 trillion won (+27%). The domestic order backlog for the top five firms also fell by 5.1607 trillion won (3%) to 178.068 trillion won, though the decline was sharper overseas.
A representative from Samsung C&T stated, "While new orders were limited through the third quarter, we secured major overseas projects in the fourth quarter, such as a highway construction project in Turkey (260 billion won) and a desalination power plant in Qatar (4 trillion won). We also secured an Ansan data center development project (400 billion won) domestically and are planning additional housing orders by the end of the year," adding, "We will strive to meet the order targets set at the beginning of the year."
The reduction in order backlogs is attributed to a decrease in new order volume. According to each company's investor relations (IR) materials, the total new order volume for the five major listed construction companies in the third quarter reached 58.7175 trillion won on a consolidated basis, a decrease of 9.8356 trillion won (14%) compared to the same period last year. By company, new orders fell for four firms: Samsung C&T (10.155 trillion won, -35%), Hyundai E&C (22.258 trillion won, -13%), Daewoo E&C (7.3722 trillion won, -18%), and DL E&C (5.9715 trillion won, -44%). GS E&C was the only company to see an increase, with 12.9608 trillion won (+69%).
An official from the construction industry commented, "With cost ratios rising due to the real estate slump and increased construction material prices, large construction companies have been lowering their order targets since the beginning of the year and focusing on selecting high-profit projects. GS E&C is the only major construction firm to have increased its order target this year, following the resolution of the accident at the Geomdan New Town site in Incheon," adding, "It remains to be seen whether construction firms will be able to achieve the goals they set at the beginning of the year."