Hanwha Construction Division Reports Losses for Two Consecutive Years... 30.9 Billion KRW Deficit
"Escaping Deficits" Is the Biggest Challenge for CEO Seungmo Kim
Accelerating the Shift to a 'Developer'... Performance to Be Fully Reflected
Seungmo Kim, CEO of Hanwha Construction Division, is virtually confirmed for a 'third term.' According to the Financial Supervisory Service's electronic disclosure system, Hanwha will hold a shareholders' meeting on the 26th to address the agenda of reappointing CEO Seungmo Kim as an inside director. Despite continuous deficits during his tenure and a 14-fold increase in losses compared to the previous year, the reappointment is expected to proceed smoothly as the proposal has already passed the board of directors. A Hanwha Construction Division official stated, "It is a matter to be decided at the shareholders' meeting," withholding further comments.
CEO Kim, who previously assisted Dongkwan Kim, Vice Chairman of Hanwha Group, in leading the solar power business, was first appointed as CEO of Hanwha Construction in 2021. Since Hanwha Construction merged with Hanwha in 2022 and relaunched as the Hanwha Construction Division, he has continuously served as CEO. If reappointed at this shareholders' meeting, Kim will begin his third term. In the recent construction industry, where personnel changes have been active?with eight out of the top ten construction companies by construction capacity evaluation replacing their CEOs between the end of 2023 and last year?a third term is an unusual occurrence.
Kim's most urgent task is to 'escape from deficits.' Since changing its name from 'Hanwha Construction,' the Hanwha Construction Division has not been able to break away from losses. The division recorded an operating loss of 2.2 billion KRW in 2023. Last year, the operating loss expanded 14 times to 30.9 billion KRW. The decline in performance due to the downturn in the construction market became apparent as the company adjusted its business structure, including selling its offshore wind power business to Hanwha Ocean. Reducing the debt, which increased from 6.1247 trillion KRW in 2022 to 7.608 trillion KRW last year, is also expected to be a major task for CEO Kim.
If Kim is appointed this year, it will mark the period when the company begins to receive the results after transforming into a 'developer.' The performance of projects such as the Seoul Station North Area Complex Development (with a project cost of 3.1 trillion KRW), which began construction in November last year, the Suseo Station Transfer Center Complex Development (1.6 trillion KRW), scheduled to start this year, and the data center business will be reflected this year. Complex development refers to creating complexes that combine residential, commercial, and office facilities. These projects reflect CEO Kim's determination for Hanwha Construction Division to establish itself as a developer beyond a simple construction company.
Performance recovery is also expected in the overseas construction market. The Iraq Bismayah New City project, which began in 2012, is a representative example. The contract was terminated in 2022 due to unpaid construction costs in Iraq but resumed last December after signing a revised contract with the Iraq National Investment Commission (NIC). The construction target is about 70,000 households, excluding the previously completed portion of the total 100,000 households.
Jangwon Kim, a researcher at BNK Investment & Securities, said, "Hanwha Construction Division plans to proceed with the Iraq project as soon as approval is obtained from the Iraqi government, despite difficulties caused by project delays and contract termination," adding, "Order performance is expected to improve compared to last year, and there is growing anticipation for the new projects underway."
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