Bumyang Construction, a mid-sized builder ranked No. 182 in construction capability evaluation, failed to overcome its management woes and is entering corporate rehabilitation (court receivership) again after 12 years. Bumyang Construction, mired in complete capital erosion, saw eight single sales and supply contracts canceled one after another over the past year and now also faces a delisting crisis.
According to the construction industry and the Financial Supervisory Service's electronic disclosure system on the 10th, Bumyang Construction canceled eight single sales and supply contracts in succession over roughly a year from Jan. 1 last year to now. The total comes to 192.4 billion won. Considering that only two such cases occurred over the five years from 2020 to 2024, it is clear this is highly unusual. Those two cancellations also occurred at the end of 2024, effectively bringing the management crisis to the surface from that point.
The largest cancellation involved the new logistics warehouse construction in Mieum-dong, Gangseo-gu, Busan. Originally, Bumyang Construction subsidiary Samjin & Company purchased the site to strengthen its logistics business. However, as Bumyang Construction faced deteriorating soundness and decided to sell the site to secure liquidity, the warehouse construction contract with Samjin & Company was also canceled in March last year. The canceled amount was about 123.7 billion won, which is 102.50% compared with recent revenue of 120.7 billion won based on the 2023 year-end consolidation financial statements.
Most recently, on the 12th of last month, the contract for the Jeonju city jurisdiction national highway bypass (Yongjin–Uoa 1) construction was terminated. This came as Bumyang Construction withdrew from the joint supply consortium under an agreement among the Ministry of Land, Infrastructure and Transport's Iksan Regional Land Management Office, the ordering party, and the consortium participants. The canceled amount was about 9.4 billion won, which equals 7.85% of Bumyang Construction's revenue.
In addition, contracts were canceled one after another for the 22.1 billion won new public-supported private rental housing construction in Geoje-dong, Yeonje-gu, Busan, the 7 billion won Deokcheon (Hwamyung)–Yangsan road traffic system improvement, the 1 billion won Ganggugu Bridge disaster risk zone maintenance project, the 6.4 billion won Donghae New Port access road construction, the 120.7 billion won Cheongun underpass installation project, the 3.6 billion won Singye water purification plant relocation and expansion and advanced water treatment facility installation, and the 12.9 billion won National Route 5 Chuncheon–Hwacheon 2 road construction.
Based in the Busan area, Bumyang Construction was founded in 1958 and expanded its business mainly through public works. It was listed on the Korea Exchange in May 1988, but after the global financial crisis, it entered court receivership once in 2011. In 2013, current CEO Kang Byung-joo acquired the company, graduated from corporate rehabilitation in three years, and climbed to No. 93 in construction capability evaluation by 2020.
However, the recent construction downturn rapidly worsened Bumyang Construction's financial condition again. Operating profit of about 12 billion won in 2020 plummeted to 3 billion won in 2021, then came to 12.3 billion won in 2022, 10.4 billion won in 2023, and 38.2 billion won in 2024 before swinging to an operating loss of 26.9 billion won as of the third quarter last year. As losses accumulated, total equity turned to minus 16.8 billion won, entering complete capital erosion. In the end, it collapsed again 12 years after returning to the market in 2014.
As the situation worsened, Bumyang Construction tried to buy time by selling assets and winding down sites. An industry official said, "Because the surge in construction costs was not reflected in the order contracts, the more the company carried out the work, the more costs occurred first, and that burden was reflected directly as losses," adding, "As it failed to generate cash flow from its core construction sites, it appears to have judged that improving its own revenue structure would be difficult."
Ultimately, Bumyang Construction filed for commencement of rehabilitation proceedings on the 6th of last month, and the Suwon Bankruptcy Court decided to commence rehabilitation for Bumyang Construction on the 16th of the same month. The deadline to submit Bumyang Construction's rehabilitation plan is May 8, after which the court will review it and decide whether to approve rehabilitation. The court did not appoint an external administrator and designated Bumyang Construction CEO Kang Byung-joo as the administrator.
To make matters worse, Bumyang Construction became subject to delisting after receiving a notice of a disclaimer of opinion on its 2024 financial statements in March last year. As a result, the company's share price, which had hovered in the 3,000 won range a year ago, was halved to 1,935 won and trading was suspended. Bumyang Construction filed an objection to the delisting and has been granted a correction period through April this year.