15 Construction Companies Added a Total of 99 New Project Purposes Over 3 Years
Domestic construction companies are accelerating their entry into new businesses to reduce performance volatility caused by changes in the market environment and to establish conditions for stable profit generation.
According to the Construction Trend Briefing (No. 928) published by the Korea Research Institute for Construction Industry on the 22nd, 15 construction companies added a total of 99 new business purposes to their corporate articles of incorporation over the past three years (2021?2023). This survey targeted 31 out of 42 construction companies with a construction capacity evaluation amount (civil engineering and architectural construction business) exceeding 1 trillion won this year that disclosed their semi-annual reports.
The main goals for expanding business areas were ▲enhancing corporate value through diversification ▲reducing uncertainty in the order-receiving industry ▲creating foundational conditions for stable cash flow generation. This is because the construction industry, a lagging business in the economic cycle, has entered the maturity phase of the industrial cycle, and if the economic low-growth phase continues, a decrease in the construction industry's share of Gross Domestic Product (GDP) and deterioration of management conditions are expected.
Trends in construction companies’ entry into new businesses include waste and water treatment, smart construction, and renewable energy. Specifically, SK Ecoplant has expanded its portfolio by adding business purposes in 2021 (environment) and 2022 (energy) to become a leading company in Environmental, Social, and Governance (ESG).
IS Dongseo added 14 new business purposes. It broadened its business portfolio to include production, processing, and sales of agricultural, fishery, and livestock products, and strengthened environmental management through renewable energy production and sales. It also prepared new growth engines by developing, manufacturing, processing, and selling compounds related to secondary battery materials.
Hanshin Engineering & Construction also added 14 new business purposes aiming for ▲business diversification such as commercial rental and driving instruction ▲mergers and acquisitions (M&A) of affiliates in retail, sales agency, and promotional advertising services ▲entry into precast concrete (PC) and video security equipment manufacturing and production businesses.
The Korea Research Institute for Construction Industry emphasized that portfolio diversification for construction companies is becoming a necessity rather than a choice. This is due to increasing uncertainties in the construction industry caused by the government’s tight monetary policy, rising prices of major raw materials, and deterioration of the housing market.
Kim Hwarang, a senior researcher at the Korea Research Institute for Construction Industry, said, "Major overseas advanced companies are also actively pursuing business diversification into real estate development, energy and utilities, and public-private partnership (PPP) related fields," adding, "The future direction of this era’s paradigm shift is drawing attention."
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