It has been revealed that the net borrowing fund of 13 major construction companies with a credit rating of A or higher is nearing 10 trillion won. During the first three quarters of last year alone, the net borrowing fund increased by over 60%. The net borrowing fund is the figure obtained by subtracting cash and cash equivalents held by corporations from total borrowing funds, serving as an indicator of financial stability.
Although construction work was underway, the companies faced cash liquidity issues due to unbilled construction costs and outstanding receivables that accumulated because they could not invoice clients for the construction expenses. This analysis indicates that companies have used internal reserve cash or borrowed from financial institutions to fund their operational capital. Additionally, SK Eco Plant, a construction subsidiary of SK Group, is also cited as a reason for the increase in borrowing funds, as it has been pursuing mergers and acquisitions (M&A) through borrowing to engage in new businesses, including eco-friendly and energy sectors.
According to Korea Credit Rating on the 10th, the net borrowing fund of 13 construction companies with a credit rating of A or higher was recorded at 9.9 trillion won as of the third quarter of last year (end of September). Until 2021, there was almost no net borrowing fund, and it remained at around 6 trillion won in 2022 and 2023, but it increased by 3.8 trillion won (62.2%) over the nine months last year.
Looking at the borrowing funds by construction company, SK Eco Plant had the highest borrowing fund at 5.1338 trillion won. The increase in SK Eco Plant's borrowing fund is linked to the acquisition of subsidiaries related to the environment and energy sectors. In 2021, SK Eco Plant acquired the offshore wind power company Samkang M&T and rebranded it as SK Oceanplant. In 2022, it acquired TES, a company specialized in electric and electronic waste, which then launched as SK TES. During this process, they utilized borrowing funds. A company official noted, "The increase in borrowing funds is due to strategic investments such as M&A to transition the environmental and energy business portfolio over the past three years."
GS Engineering and Construction (2.9189 trillion won), HDC Hyundai Development Company (1.5816 trillion won), and Lotte Construction (1.5170 trillion won) are also among the companies with high net borrowing funds. An official from GS Engineering and Construction explained, "Until last year, we actively pursued new businesses, including battery recycling and new investments in overseas development projects, and these factors contributed to the increase in borrowing funds."
While some construction companies have seen an increase in borrowing funds due to the expansion of new businesses, the increase for the majority of them is linked to rising construction costs and related project delays. As labor and material costs surged sharply, many construction sites faced interruptions, leading to delayed sales schedules and an increase in unsold properties. With sales proceeds not coming in, cash liquidity worsened, forcing companies to rely on external financial support.
Kim Sang-soo, a senior analyst at Korea Ratings, stated, "Construction companies have seen an increase in receivables due to unbilled construction work, and in the situation where they are unable to receive due payments, the burden on cash liquidity has grown, leading them to borrow externally or use internal reserve cash." This means that although sales have increased due to securing construction contracts, the actual payments owed to the companies have been delayed, worsening their cash liquidity situation.
The proportion of receivables, including outstanding payments, relative to total sales confirms this situation. As of the third quarter of last year, the construction company with the highest proportion of receivables was Shinsegae Construction at 49.2%, meaning that nearly half of its sales are comprised of unpaid amounts. Following it are HDC Hyundai Development Company (44.7%), KCC Construction (43.7%), and Lotte Construction (40.9%), all exceeding 40% in terms of receivables relative to sales.
Lee Eun-sang, a researcher at NH Investment & Securities, noted, "With an increase in establishments experiencing delays in sales since 2022, the outstanding receivables and sales receivables for construction companies have risen, which has impacted the increase in borrowing funds. However, starting from this year, we forecast that this phenomenon will gradually improve."