POSCO E&C Returns to Deficit After Two Quarters... A Series of Safety Accidents Adds to Woes

91 Billion Won Operating Loss in Q2
Deficits Deepen in Overseas Plant and Infrastructure Divisions
Reconstruction Costs for Gwangmyeong Shinansan Line to Be Reflected in Second Half, Losses Could Reach Hundreds of Billions
President's Reprimand Amid Series of Fatal Accidents... Extraordinary Measures for Top Priority on Safety

POSCO E&C has returned to a deficit after just two quarters in the black. For POSCO E&C, which has been struggling with a series of fatal accidents, this adds further difficulties to an already challenging situation.

POSCO E&C Songdo Headquarters. POSCO E&C.

On July 31, POSCO E&C announced that its second-quarter results showed sales of 1.866 trillion won and an operating loss of 9.1 billion won. Compared to the same period last year, sales decreased by 27.9%, and operating profit turned into a deficit. On a quarterly basis, this marks a return to losses after two quarters, the first since the fourth quarter of last year (operating loss of 6.3 billion won).

By business division, the plant segment recorded sales of 481 billion won and an operating loss of 7 billion won. The infrastructure division also posted an operating loss of 5.6 billion won (sales of 213 billion won). Only the architecture division managed to achieve a profit, posting an operating surplus of 2.5 billion won (sales of 1.173 trillion won). Since last year, POSCO E&C has continued to see losses in its plant and infrastructure divisions, with the architecture division offsetting these losses.

Regarding the reasons for the deficit, POSCO E&C explained, "We returned to a deficit due to the inclusion of additional costs for certain overseas projects," and added, "Losses from the Malaysia power plant and Poland incinerator projects were reflected." The outlook for the second half of the year is even gloomier. This is because costs for the reconstruction of the road collapse site at the Gwangmyeong Shinansan Line construction project are expected to be fully reflected starting in the second half. The Shinansan Line is a project in which Next Train, with POSCO E&C as its largest shareholder, is participating in construction. The reconstruction is expected to begin after the accident investigation committee, which is currently being conducted by the Ministry of Land, Infrastructure and Transport, is concluded. Depending on the results of the investigation, the reconstruction costs could reach several hundred billion won.

Meanwhile, POSCO E&C has seen a total of four fatalities: a fall accident at an apartment site in Gimhae, Gyeongnam in January; a collapse at the Gwangmyeong Shinansan Line construction site in Gyeonggi in April; a fall accident at a mixed-use residential site in Daegu in April; and a drilling rig entrapment accident on the Hamyang-Changnyeong Expressway in Gyeongnam in July. On July 29, immediately after President Lee Jaemyung issued a reprimand, CEO Jung Heemin issued a public apology and halted all operations at every site. The company is currently overhauling its safety management system, forming a safety task force that includes external experts to identify structural causes.