GS E&C faces heavy loss in Q2 due to apartment reconstruction plan

The expense for the rebuilding project is estimated at $432 mn; the firm's housing and water treatment business has boosted sales

Parking lot collapse at GS E&C's new apartment building in Incheon on April 29, 2023 (Courtesy of Yonhap News))

Jin-Woo Park 1

2023-07-26 18:19:28 jwp@hankyung.com

Construction

GS Engineering & Construction Co., South Korea’s major construction firm, posted a quarterly operating loss in the April-June period for the first time in nine years, due to heavy losses from the collapse of its Incheon-based new apartment building parking lot that occurred on April 29.

The company posted a 413.8 billion won ($324.9 million) operating loss in the second quarter, 11.7% more than consensus estimates, in its preliminary financial report on Wednesday. The quarterly net loss amounted to 279.7 billion won.

GS E&C has reflected 550 billion won in estimated losses for the reconstruction of the entire apartment complex. Excluding the rebuilding expenses, the firm achieved 295 billion won operating profit in the second quarter.

This is the first time the company has logged a quarterly operating loss since the January-March period of 2014, when it was affected by the aftermath of the 2008-09 Global Financial Crisis.

The construction firm posted 3.5 trillion won in second-quarter revenue, up 14.7% on-year, thanks to brisk sales of housing and new businesses such as water treatment and battery recycling.

It achieved 5.5 trillion won in housing construction revenue in the first half of this year, up 31.9% on-year. The revenue in the infrastructure business reached 584 billion won in the first half, up 18.5% from a year ago.

The company is ramping up sales of its new businesses, such as water treatment, battery recycling and modular buildings, which are built off-site and assembled on-site. The new businesses achieved 662 billion won in half-year revenue, up 46.8% on-year.

The construction firm posted new orders worth 3.6 trillion won in the second quarter, with a 71.1% increase from a year ago. The orders include a 731 billion won project to build a 22.8 kilometer-long-expressway in Busan and a 296 billion won sewage treatment infrastructure project in Brazil, the company said.

Write to Jin-Woo Park at jwp@hankyung.com

Jihyun Kim edited this article.