It was found that last year's profitability in the construction industry fell to the lowest level in 10 years.
According to the report "Analysis of 2024 management performance of construction companies subject to external audits and marginal corporations," published by the Construction & Economy Research Institute of Korea (CERIK) on the 28th, the net profit margin of construction corporations subject to external accounting audits is 0.8%. CERIK said it is the first time since 2015 that the net profit margin has fallen into the 0% range.
The average net profit margin of general construction fell into the red, from 0.5% in 2023 to -0.2% in 2024. Over the same period, mid-sized companies also fell from 0.0% to -0.4%.
The share of corporations with an interest coverage ratio below 1, which cannot cover interest costs with operating profit, grew from 43.7% in 2023 to 44.2% in 2024. Marginal corporations for which this situation persisted for three consecutive years account for 22.6%.
As of 2024, there are 473 marginal corporations in the construction industry. By size, there are 8 large corporations (1.7%), 59 mid-sized corporations (12.5%), and 406 small and medium-sized corporations (85.8%).
By region, Yeongnam had the highest share of marginal corporations at 27.4%. Compared with 2023, Gangwon-Jeju rose by 11.9 percentage points (p), and Gyeonggi-Incheon rose by 3.6 p, respectively.
The report analyzed that construction costs, which rose after the COVID-19 pandemic, remain high, and despite a decline in the base interest rate and a decrease in liability ratios among corporations subject to external audits, interest costs increased 18.4% from a year earlier, leading to a deterioration in revenue ratios.
Kim Tae-jun, head of the New Growth Strategy Research Office at CERIK, said, "With the rise in insolvencies across the construction sector, chain-reaction damage is growing—such as disputes over subcontract payment, wage arrears for workers, and a decline in construction jobs—so countermeasures are urgently needed."