À̹ÌÁö È®´ë South Korea¡¯s Daewoo Engineering & Construction Co. (Daewoo E&C) that booked massive forward-looking losses in the fourth quarter posted all-time high quarterly operating profit for the first quarter of this year, thanks to the booming house construction business at home and abroad.
With the improved financial health and rosy earnings outlook this year, the company is expected to draw many probable buyers when it¡¯s put up for sale later this year.
Daewoo E&C said in a regulatory filing on Tuesday that its preliminary operating profit from January to March expanded by 171 percent from a year ago to a record high of 221.1 billion won ($196 million), 69.4 percent higher than the market consensus of 130.5 billion won. Revenue rose 3.2 percent on year to 2.64 trillion won, which is also higher than market estimation of 2.55 trillion won. Its net profit swung to black reaching 222.7 billion won.
Shares of Daewoo E&C closed Wednesday at 7,290 won, up 0.14 percent from the previous session.
The better-than-expected earnings mainly owed to its successful housing and construction projects and a turnaround in its overseas business. Song Yoo-rim, an analyst from Hanwha Investment & Securities Co., also said that the much-improved operating profit is attributable to its big bath accounting to reflect all possible losses ahead in the fourth quarter last year following due diligence on its all businesses at home and abroad. The company booked nearly $700 million in loss reserves in the previous quarter.
Market analysts believed the builder would continue to record strong earnings this year. The market consensus compiled by market data provider FnGuide estimated that the company would rake in 671.3 billion won in operating profit this year, but some experts expected the figure would even reach 700 billion won. If it achieves 700 billion won in profit, it would be the highest-ever full-year profit for the company.
Daewoo E&C has an ambitious goal to achieve 1 trillion won in profit this year by supplying 27,838 houses. An official from the company said it expects its profitability would continue to improve as some lucrative projects including Star Lake New City project in Vietnam will soon begin generating revenues. Its upcoming Dahiyat Alfursan New City project in Saudi Arabia worth 22 trillion won, the largest for a domestic builder, would also make a significant contribution to its earnings if it kicks off as planned.
Daewoo E&C¡¯s largest shareholder Korea Development Bank (KDB) owning a 50.75 percent stake has recently renewed its attempt to sell the constructor, one of the Korea¡¯s three major builders, as it has regained market confidence after receiving a clean opinion on its financial statements for 2016 from an auditor.
The state lender is set to put out a public notice for sale in July or August and initiate the sale procedures around October. In order to enhance its corporate value ahead of the sale, the builder is expected to aggressively pursue housing projects to maximize profits in a short period of time, according to a source from the investment banking industry.
By Yong Hwan-jin and Yoo Tae-yang
[¨Ï Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]