Daewoo E&C, ranked No. 3 in Korea in construction capability (as of 2025), is expected to see this year's net profit shrink to the 10 billion won range. Some securities firms even forecast a swing to a loss, projecting a net loss. Daewoo E&C posted more than 240 billion won in net profit last year. The reason an "earnings shock" is expected for Daewoo E&C is that several hundred billion won in one-off expense has arisen at overseas civil-engineering sites in Iraq, Singapore and Kuwait. A large unsold apartment situation at domestic projects, including in Daegu, is also believed to have weighed on results.
According to FnGuide and the investment industry on the 8th, as of the 5th, the annual net profit consensus (the average of securities firms' forecasts) for Daewoo E&C this year was compiled at 13.9 billion won. That is 5.7% of last year's net profit of 242.8 billion won. Compared with 2024 net profit, the industry expects this year's net profit to drop 94.3%.
Some securities firms also projected an annual net loss. Daishin Securities Co. expected Daewoo E&C to post a net loss of 43 billion won this year, while Sangsangin Investment & Securities also analyzed that it would turn to a loss, recording a loss of 28 billion won.
The main reason Daewoo E&C's profit is seen plunging is a surge in one-off expense at overseas civil-engineering sites this year. Daewoo E&C already told major securities analysts last month that one-off losses of 49 billion won occurred at two civil sites in Iraq and Singapore. At the Iraq site, the construction period was extended, increasing expense, and at the Singapore site, losses reportedly occurred due to currency-related risk. A source in the investment industry said, "They did not disclose the specific project names, but they did reveal the estimated loss amounts."
In the industry, the site where expense increased due to an extension of the construction period is expected to be the Al Faw new port project site in Basra Province in southern Iraq. In this project to build a large national port in the Al Faw area of Basra Province, Daewoo E&C is carrying out quay wall work and construction of an immersed tunnel. A quay wall is a facility that allows ships to berth safely to load and unload cargo or embark and disembark passengers, and an immersed tunnel is built by prefabricating caissons on land, transporting them to the site, and burying them underwater.
In Apr., Daewoo E&C amended the contract period related to dredging and reclamation for the container terminal in this project to Dec. 30, 2026, from Dec. 25, 2021. When the project was first won in 2020, the contract period was not specified, but this year the construction deadline was presented as the end of next year.
At a plant site in Kuwait, about 13 billion won in expense has already been spent on repairs for defects at a completed plant. In 2020, a joint venture formed by Daewoo E&C and Hyundai Heavy Industries expanded a refinery ordered by Kuwait National Petroleum Co. (KNPC), and defects occurred at this plant, prompting repair work, according to reports.
Cho Jeong-hyeon, an analyst at IBK Securities, analyzed the third-quarter results by saying, "Erosion of profitability in the civil-engineering sector continues." Lee Tae-hwan, an analyst at Daishin Securities Co., also said, "Because of one-off expense, (profitability) falls short of expectations."
In addition, Daewoo E&C has seen a sharp increase in one-off expense such as provisions for bad debts (50 billion won) related to unsold apartment receivables in Daegu and litigation costs. "Sangin Prugio Center Park," a 990-household complex of nine buildings with up to 29 floors above ground and two basement levels built by Daewoo E&C in Sangin-dong, Dalseo-gu, Daegu, remained unsold even after completion. JB Asset Management's corporate restructuring real estate investment company (CR REITs) has decided to purchase the entire complex.
As Daewoo E&C's profitability deteriorates due to one-off factors, the net profit attributable to controlling shareholders to be returned to Jungheung Group, the largest shareholder of Daewoo E&C, including Jungheung Construction and Jungheung E&C, is also expected to drop sharply. The securities firms' average forecast for this year's net profit attributable to controlling shareholders is only 4.8 billion won. Jungheung Group holds a 50.75% equity stake (210,940,6209 shares) in Daewoo E&C.
A Daewoo E&C official said, "For matters with the potential to incur losses at overseas business sites, we reflected them first in this year's financial statements, and we will closely review whether there are parts of these pre-recognized losses that can later be reversed into profit and work to increase the reversal amount."