"It's Hard to Survive on Housing Construction Alone"... Mid-Sized Builders Scaling Up New Businesses [Real Estate AtoZ]

Environmental Business Share on the Rise
BS Hanyang Invests in Energy Sector
Diversifying Business Portfolios

Amid a prolonged downturn in the construction market, mid-sized construction companies have begun fostering new business ventures. Even though initial investment costs are high and it takes time to generate profits, these companies are diversifying their business portfolios from a long-term perspective.

According to the Financial Supervisory Service’s electronic disclosure system on December 31, as of the third quarter of this year, the environmental business division of IS Dongseo accounted for 37.8% of the company’s total sales. This is the highest among the company’s four business segments: concrete, construction, environment, and others. Compared to the same period last year, this figure increased by 6.9 percentage points.

The environmental business division of IS Dongseo is responsible for battery recycling and construction waste management. In particular, the company is putting a strong emphasis on the battery recycling business. Through its subsidiaries, IS Eco Solution (battery recycling) and Insun ENT (intermediate processing of construction waste), IS Dongseo is pursuing vertical integration within its environmental business division.

As the performance of the construction division has sharply declined, the importance of new businesses has increased. IS Dongseo’s cumulative construction division sales for the third quarter of this year amounted to 333.6 billion won, which is a 52.8% decrease compared to 706.2 billion won during the same period last year. Although sales in the environmental business division (342 billion won) also decreased by 8.7% during the same period, it still accounted for the largest share of total sales.

There is a growing outlook that fostering new businesses, as seen with IS Dongseo, will play an important role in weathering the challenges of the construction market downturn. Korea Ratings stated in its performance outlook, “Over the mid- to long-term, the environmental business division will mitigate the volatility of the construction division’s performance,” adding, “Considering the gradual recovery potential of the real estate market, the long-term expansion of electric vehicle demand, and the restructuring of global supply chains, mid- to long-term performance improvement is expected.”

BS Hanyang is investing in the energy sector with the goal of transforming into a comprehensive energy company. The share of sales from the infrastructure and energy division, which oversees businesses such as renewable energy (solar and wind power), LNG hub terminals, and civil engineering, rose from 23.9% at the end of last year to about 31.1% as of the third quarter.

BS Hanyang stated, “The housing market, which led the recovery of the construction industry, has ended its boom, and the downturn in the construction sector is becoming prolonged, demanding further progress. While seeking various advanced strategies to secure new growth engines, we are also diversifying our portfolio through smart city and energy businesses.” Currently, major projects in the energy sector, such as the Northeast Asia LNG hub terminal and the Gwangyang biomass power plant, are under construction.

An industry official commented, “Focusing solely on the housing construction business makes companies too susceptible to the industry’s booms and busts, so C-level executives are continuously being asked to find new growth engines. Both large and small companies are concerned that relying only on the housing business could lead to continued volatility in the future.”