Daewoo E&C Utilizes 2021 to Build Foundation for Mid- and Long-Term Growth

President Kim Hyung of Daewoo Engineering and Construction Co. (Photos: Daewoo E&C)

With a near year on the horizon, companies are wrapping up their 2020 business years and taking stock of their wins and losses.

The corporate management environment will be remembered as one where potential was maximized amid much uncertainties, such as the resurgence of the Covid-19 pandemic, raw materials prices going up and logistics quagmires.

Despite stark external factors weighing on markets, Daewoo E&C has been evaluated to have laid a foundation for mid- and long-term sustainable growth by improving its financial structure and securing future growth engines.

In particular, as Daewoo E&C secured governance stability by completing M&A, the contractor plans to make diverse investments, including in ESG management, which has emerged as a new global trend.

As Jungheung Group struck a share purchase agreement with KDB Investment in December, business sources said Daewoo E&C is expected to be reborn as a member of the Jungheung Group family.

Jungheung Group and Daewoo E&C have chosen a format of becoming a separate entity based on independent management, instead of a traditional merger, like the model adopted by Hyundai Motor and Kia Motor.

The step has led to the eliminating of uncertainties related to Daewoo E&C’s governance structure, and lays a stable foundation for mid- and long-term growth.

A view of the site of a project to build a container terminal in Iraq, being implemented by Daewoo E&C.

As Jungheung Group and Daewoo E&C each have strengths in their own specialized sectors, albeit in the same construction field, the independent management method is evaluated to be suitable for synergetic effects by making the most of each company’s strengths, such real estate development capabilities, brand standing, construction capabilities and overseas business.

Jungheung Group plans to prioritize securing financial soundness by dramatically lowering Daewoo E&C’s debt ratio, which stood at 223 percent as of the third quarter of 2021. It is expected to secure a solid foundation for stable growth.

Daewoo E&C has been implementing efforts to secure financial stability through continuous corporate value upcycle activities. The contractor had managed to lower its debt ratio to 223 percent as of the 2021 Q3, a 67percentage point drop from a peak of 290 percent in late 2019.

Daewoo E&C maintained stability by raising the portion of long-term borrowings to 67 percent as of 2021 Q3 through continuous efforts to prolong borrowing periods, such as the expansion of long-term borrowings through the issuance of corporate bonds with a maturity of three to five years, as well as reducing short-term borrowings by improving cash flow.

Daewoo E&C has seen its net debt ratio halve, from 44 percent in late 2020 to 19 percent in 2021 Q3, on the back of a good business performance. Daewoo E&C’s business performances are superb.

Daewoo E&C posted 6,246.5 billion in cumulative sales and 534 billion won in cumulative operating profit the third quarter of 2021. Given the exacerbated outside conditions, caused by raw material price hikes and the spread of the Delta variant of the pandemic, Daewoo E&C exceeded expectations in Q3.

The contractor saw its 2021 Q3 sales approach those of the whole of last year: It posted 8,136.7 billion won in sales and 558.3 billion won in operating profit. Daewoo E&C is forecast to see its business performance for the whole of 2021 surpass that of last year.

A Daewoo E&C official said, “Our continuous improving of the financial structure has raise market credibility, and we plan to push for a full-fledged growth by laying a foundation for a second take-off trough continuous investment when we complete a M&A with Jungheung Group.”

A view of the seawall of the Al Faw port in Basra, Iraq, built by Daewoo E&C.

Lands Largest-Ever Urban Renewal Projects, Securing Future Growth Engines

Daewoo E&C has succeeded in securing future growth engines by landing a streak of orders in diverse sectors.

In particular, the contractor has achieved winning orders worth 3,777.4 billion won from 14 projects, including urban refurbishment ones in Sanggye 1st Zone, Heukseok 11th Zone in Seoul and former LH 5th complex redevelopment project in Gwacheon.

The contractor successfully entered the remodeling business by winning projects such as the Garak Ssangyong 1st and Yongin Suji Hyundai Apartment remodeling projects.

Daewoo E&C has ramped up its competitive edge to secure an upper hand in the remodeling market, which is predicted to be created in earnest in areas such as Ilsan and Bundang.

The contractor is expected to achieve the 2021 sales goal of posting 11.16 trillion won on the back of new orders.

The contractor also does not spare efforts to invest into carbon neutrality, based on the nation’s top-tier technology competitiveness and construction experiences as the ESG sector emerges as a global buzzword.

Daewoo E&C participated in a project to build the Eco Wind Power Complex in Yeongwol, Gangwon-do, in May to successfully enter the related market.

The contractor has secured technologies related to the design and construction of offshore wind power units by having implemented a state-invested task of building a more than 30MW wind power generation turbine and tower project since 2011.

In April, Daewoo E&C struck an MOU on a hydrogen fuel cell convergence power generation project with Chungcheongbuk-do provincial government, Eumseong County and Chungbuk Development Corp. in which the contractor is establishing a plan on a project to build a hydrogen fuel cell power plant capable of producing 200MW electricity per hour.

Daewoo E&C plans to prioritize in the renewable energy sector by designating it as future new growth engines. The contractor plans to participate in diverse businesses based on a variety of its own new technologies and patented technologies.

A Daewoo E&C official said, “We’ve built stable growth foundation based on the nation’s top tier competitive edge despite the stark outside and inside business uncertainties, such as the spread of the variants of the pandemic and raw material price hikes.”

Daewoo E&C will establish itself as a construction leader in the era of the 4th Industrial Revolution, based on continuous innovation, securing new growth engines, and ESG management, the official added.

A view of Daewoo E&C’s new building “Euljiro Twin Tower.”