Efforts to Secure Order Competitiveness Focused on Existing Businesses
Concentrating on Strengthening Fundamentals Over External Growth
Aiming for Stable Overseas Projects like EDCF and ODA
Prolonged Domestic Construction Downturn Highlights Importance of Risk Management
As concerns about profitability and financial structure in the construction industry increase, mid-sized construction companies are responding to changes in the construction market environment by securing public and private construction orders and participating in ODA (Official Development Assistance) projects under conservative order principles.
On the 14th, the Construction Industry Research Institute explained in a trend briefing, "High costs have become entrenched due to high interest rates and inflation, and concerns about the profitability and financial structure of construction companies are growing due to contingent liabilities such as project financing (PF)." It added, "This year, mid-sized companies are focusing on new businesses closely related to existing business areas that do not involve large-scale investments."
Mid-sized construction companies have been making efforts to add new businesses that venture beyond their existing fields. This year, rather than diversifying their businesses, they are focusing on strengthening competitiveness within their existing business areas and emphasizing sound management. Commonly, mid-sized construction companies are concentrating on securing public construction orders, expanding overseas projects such as ODA, and winning maintenance projects.
Dongbu Construction plans to explore various business participation opportunities such as premium luxury housing complexes, public land, public offering projects, publicly supported private rental housing projects, and housing development REITs, while focusing on hospitals, remodeling, large logistics centers, and hotel construction. In overseas projects, it is reviewing participation in projects in Vietnam, Laos, and the Philippines, centered on Economic Development Cooperation Fund (EDCF) projects.
Doosan Construction intends to participate in fuel cell private power generation projects and discover new revenue sources based on its experience in existing private investment projects. This is an effort to diversify business areas and secure additional growth engines. Gyeryong Construction Industry is seeking business diversification due to intensified competition and declining profitability in the existing construction market. While actively participating in government-ordered projects across the country, it plans to expand overseas projects in the Philippines, Vietnam, Cambodia, Laos, and other regions.
Dongyang Construction Industry is aiming to diversify its business portfolio through renewable energy and plant projects. It is promoting projects such as the solar power plant in Sinan, Jeonnam, and the fuel cell apartment supply project in Hopyeong, Namyangju. Additionally, it is pursuing various new businesses by promoting SOC (social overhead capital) private investment projects.
Ilseong Construction has proposed participation in stable overseas ODA projects as a new business. Hanshin Engineering & Construction plans to secure overseas bases by entering emerging overseas markets such as Vietnam, Cambodia, and Uzbekistan. Daewon is preparing future growth engines by leveraging its business experience in Vietnam.
As new housing supply centers around maintenance projects, mid-sized construction companies are also focusing on securing large and small maintenance project orders targeting niche markets. HJ Heavy Industries plans to selectively secure high-quality maintenance projects to strengthen competitiveness in the housing business sector. Sambu Construction also announced plans to expand new orders in development trust projects, redevelopment, and reconstruction. Seohui Construction plans to pursue various new businesses, including private park development projects, rental housing projects, new logistics warehouse construction, and golf course development.
As uncertainty in the construction market expands, mid-sized construction companies are expected to maintain a conservative order stance and focus on risk management by implementing selective order strategies to secure profitability. There is a growing trend toward conservative management to ensure stable cash flow and overcome crises. With the domestic construction market downturn expected to continue for a considerable period, companies are seeking to enter overseas markets by participating in projects such as ODA, which operate with stable funding.
Mid-sized construction companies affiliated with major groups can secure a certain volume by participating in projects ordered by affiliates, but companies without such connections need company-wide efforts to secure future competitiveness individually. Since strengthening financial soundness is a more urgent task than securing funds for new business promotion, they are expected to focus on enhancing the technology and order competitiveness required for businesses in which they already have competitiveness.
Kim Hwarang, a senior researcher at the Construction Industry Research Institute, explained, "Due to the nature of the order-based industry, companies rely entirely on orders except for self-operated projects. To secure high-quality orders, it is necessary to have a sound financial structure and differentiated core technology compared to competing companies." He added, "Efficient management of working capital to alleviate financial burdens caused by deteriorating profitability will be a key factor in management."
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