Daewoo Engineering & Construction, ranked third in Korea's construction capability assessment, will release a shareholder return policy soon ahead of this year's shareholders meeting. However, the construction industry expects that, because Daewoo Engineering & Construction has maintained a no-dividends stance for 17 years, it will be difficult this time as well to expand settlement of account dividends like other major builders. Major builders other than Daewoo Engineering & Construction are seeking to lift depressed corporate value by increasing shareholder returns such as dividends.
According to the construction industry and the Financial Supervisory Service's electronic disclosure system on the 4th, Daewoo Engineering & Construction will hold its regular shareholders meeting on the 26th. What the industry is watching is Daewoo Engineering & Construction, which has continued a no-dividends stance for 17 years. Daewoo Engineering & Construction last paid dividends of 50 won per common share in 2009 under Kumho Asiana Group, and delayed dividends every time for reasons such as improving governance as ownership changed hands twice.
Daewoo Engineering & Construction has not yet released this year's dividends plan, but said it is preparing a shareholder return policy ahead of the meeting. A Daewoo Engineering & Construction official said, "The specific details of the shareholder return policy are not 100% finalized yet," adding, "We plan to release the shareholder return policy soon."
However, the industry predicted that Daewoo Engineering & Construction would find it difficult to pay dividends for the time being. Jung Won-ju, chairman of Jungheung Group, declared in 2021 when acquiring Daewoo Engineering & Construction, "I will not receive dividends until the debt ratio falls below 100%." Daewoo Engineering & Construction's debt ratio fell to 176% in 2023 right after the acquisition, but it rose quickly to 192.1% at the end of 2024 and 284.5% at the end of last year due to the deteriorating real estate market and increased borrowing fund.
The results are not good either. Daewoo Engineering & Construction posted about 403.1 billion won in operating profit on a consolidation basis in 2024, but swung to a loss last year with an operating loss of 815.4 billion won. Some also say there is no room for dividends because last year's results concentrated losses from large overseas projects such as additional expense投入 at high-cost dwellings sites and Nigeria's liquefied natural gas (LNG) Train 7.
Unlike Daewoo Engineering & Construction, major builders are responding one after another to government and market calls to expand shareholder return policies. The company with the largest increase in total dividends this year is GS Engineering & Construction. GS Engineering & Construction recently revised its mid- to long-term dividends policy, raising the payout ratio based on consolidation net income attributable to owners of the parent from at least 20% to at least 25%. It decided to pay dividends of 500 won per common share, and the total dividends will increase about 66.7% from 25.5 billion won to 42.4 billion won.
In particular, GS Engineering & Construction drew up a plan to expand dividends even by using internal reserves despite a decline in net income. GS Engineering & Construction recorded 93.6 billion won in consolidation net income last year, down 61.9% from a year earlier, which funds dividends. However, GS Engineering & Construction said it made this decision to meet the requirements for high-dividends corporations and to strengthen the shareholder return stance. As a result, GS Engineering & Construction shareholders will receive separate taxation benefits on dividend income.
Next, DL E&C's total dividends increased 61.2% to 37.1 billion won. Under a policy to pay out 25% of consolidated net income for 2024–2026 as cash dividends, DL E&C will pay 890 won per common share and 940 won per preferred share. Hyundai Engineering & Construction, which returned to the black last year, will also pay 800 won per common share and 850 won per preferred share, totaling 89.9 billion won. That is a 33.3% increase from a year earlier. Samsung E&A and Samsung C&T also expanded their dividends by 19.7% and 7.7%, respectively.
A construction industry official said, "Construction companies are often cited as an undervalued sector in the stock market, so this is seen as an effort to build investor trust over the mid to long term and raise corporations' value rather than focus on immediate results."