Hyundai Engineering & Construction, the senior player in the construction industry, is actively pursuing new business opportunities through collaboration with domestic and international public institutions and private companies. There are no boundaries in fields such as nuclear power, smart farms, and defense. At the company level, this is interpreted as an effort to overcome crises caused by global tightening and the slowdown of the domestic real estate market, while at the national level, it is seen as a move to secure competitiveness in future industries.
A total of 11 MOUs signed last year, 7 MOUs in just 3 months this year
Hyundai Engineering & Construction headquarters located in Gyedong, Jongno-gu, Seoul. [Photo provided by Hyundai Engineering & Construction]
According to Hyundai Engineering & Construction and related industries on the 29th, Hyundai Engineering & Construction signed a total of 7 MOUs within 3 months this year. This is the highest number of MOUs signed among domestic construction companies.
The fields are also groundbreaking. The 7 MOUs cover most areas known as future industries.
First, Hyundai Engineering & Construction started last month by signing a “Strategic Memorandum of Understanding (MOU) for Expanding New Market Entry” with China State Construction Engineering Corporation Sixth Bureau Limited, the world’s largest construction company. It also signed MOUs with the Korea Rural Community Corporation for “Establishing a Smart Agriculture Foundation and Overseas Expansion,” and with the Ministry of Land, Infrastructure and Transport, Korea Aerospace Research Institute, Hyundai Motor Group, and KT for participation in the “Korean Urban Air Mobility Grand Challenge” (K-UAM Grand Challenge) demonstration project.
This month, it signed MOUs with ▲ Sogang University to secure technology and foster talent aimed at building a metaverse platform and service development ▲ LH for inter-floor noise technology cooperation ▲ Korea Hydro & Nuclear Power to strengthen cooperation in clean hydrogen business and technology development ▲ Korea Aerospace Industries (KAI) for “Joint Development of K-Defense Export Packages and Pioneering New Overseas Markets.”
President Yoon Young-jun of Hyundai Engineering & Construction (right) and President Kang Gu-young of KAI are signing a business agreement to expand K-defense exports at Hyundai Engineering & Construction headquarters in Gye-dong, Jongno-gu, Seoul on the 27th. [Photo by Hyundai Engineering & Construction]
Considering that the 11 MOUs Hyundai Engineering & Construction signed last year were directly related to issues increasingly important in domestic and international industries, this represents a clear change. Last year, Hyundai Engineering & Construction signed 4 MOUs related to nuclear power, 2 related to ESG (environment, social, governance), 4 related to construction, and 1 related to energy.
Leading business diversification and securing competitiveness in future industries
Industry experts offer two analyses regarding Hyundai Engineering & Construction’s diverse cooperation efforts. First, Hyundai Engineering & Construction has begun to reduce its sales dependence on the housing business and actively diversify revenue through new businesses.
In fact, Hyundai Engineering & Construction is a powerhouse in the housing business, boasting high order volumes with residential brands ’The H‘ and ’Hillstate‘, supplying tens of thousands of households annually. The sales proportion of domestic construction and housing sectors accounts for about half of its total sales.
According to the Financial Supervisory Service’s electronic disclosure system, Hyundai Engineering & Construction’s domestic construction and housing sales proportions were 43.5% (7.6922 trillion KRW) in 2019, 45.8% (7.8649 trillion KRW) in 2020, 48.6% (8.9217 trillion KRW) in 2021, and 49% (10.5958 trillion KRW) in 2022.
However, due to the construction market slowdown and rising construction material prices caused by interest rate hikes starting last year, profitability has been under threat. Last year, Hyundai Engineering & Construction’s total sales increased by 17.57% to 21.2391 trillion KRW due to the expanded sales proportion of the housing business, but the cost of sales ratio rose by 2.8 percentage points to 92.9%. As a result, operating cash flow recorded a loss of 143.4 billion KRW, compared to a net cash inflow of 1.0094 trillion KRW the previous year.
Ultimately, business diversification is more important than ever for Hyundai Engineering & Construction, which heavily depends on the housing business, to survive.
Yoon Young-jun, CEO of Hyundai Engineering & Construction, stated at the regular shareholders’ meeting held on the 23rd, “Global tightening and the domestic real estate market slowdown will increase management burdens,” adding, “To overcome this, we will secure future growth engines such as establishing hydrogen production bases.”
Meanwhile, there are claims that Hyundai Engineering & Construction’s MOUs signed this year are ultimately due to its technological capabilities. It is explained that domestic and international public institutions and private companies are seeking Hyundai Engineering & Construction to secure competitiveness in future industries.
A representative example is the MOU signed with Korea Hydro & Nuclear Power to strengthen cooperation in clean hydrogen business and technology development. Hyundai Engineering & Construction’s technology in hydrogen-related construction is reputed to be the best in the global market. It was already selected last year for the Ministry of Trade, Industry and Energy’s project to build a hydrogen production base based on water electrolysis and is constructing a hydrogen production base in the Buan Renewable Energy Research Complex.
The MOU for the Korean Urban Air Mobility Grand Challenge demonstration project, promoted in partnership with the government and private companies, is also evaluated as the most suitable among domestic construction companies. Due to the nature of the industry, cooperation with the main operator Hyundai Motor Group is a unique strength of Hyundai Engineering & Construction that cannot be overlooked.
An executive from a major construction company said, “For several years, domestic construction companies have focused on the housing business chasing immediate profits, which has weakened the global industrial competitiveness at the national level,” adding, “Construction is a foundational sector for all industries, and even if profits do not occur immediately, new business discovery strategies like those of Hyundai Engineering & Construction are necessary to secure the future competitiveness and create new growth engines for the national industry.” He added, “Honestly, although they are competitors, I envy Hyundai Engineering & Construction for seeking change.”
A representative from a mid-sized construction company said, “New businesses are possible because it is Hyundai Engineering & Construction,” arguing, “That much Hyundai Engineering & Construction has the experience and technological capabilities, which is why domestic and international public institutions and private companies cooperate with them.”
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