A citizen passes by the Hyundai Engineering & Construction headquarters in Seoul. /News1

Hyundai Engineering & Construction recorded an operating loss of over 1.2 trillion won ($843 million) last year, a decline of about 2 trillion won year-on-year. This marks the company’s first operating loss since 2001. Hyundai E&C attributed the loss to significant expenses from its subsidiary, Hyundai Engineering, related to overseas projects. Rising construction costs, a sluggish domestic real estate market, and poor profitability in overseas ventures have led analysts to predict a broader “earnings shock” across the construction sector.

In a regulatory filing on Jan. 22, Hyundai E&C reported a preliminary consolidated operating loss of 1.22 trillion won, a sharp decline from the previous year’s operating profit of 785.4 billion won. However, the company’s annual sales increased by 10.3%, from 29.65 trillion won to 32.69 trillion won.

The South Korean builder explained that the massive operating loss was driven by rising exchange rates, higher raw material prices, and increased costs from Hyundai Engineering’s overseas projects. A Hyundai Engineering staffer said, “Over 1 trillion won in losses from projects like the Balikpapan Refinery in Indonesia and the Jafurah Gas Field in Saudi Arabia were recorded in the fourth quarter due to soaring construction costs, project delays, and design changes.”

Other major construction firms are also expected to report significant declines in operating profits. Yuanta Securities forecasts a 47.9% drop in Daewoo E&C’s operating profit to 345 billion won and an 18.1% decrease in DL E&C’s profit to 271 billion won. In contrast, Samsung C&T’s construction division showed resilience despite the downturn, reporting a 3.2% decrease in operating profit to 1.001 trillion won.

Construction companies point to rising costs as the main reason for their poor performance. An industry insider explained, “A few years ago, building a Seoul apartment cost around 5 to 6 million won per pyeong (3.3 square meters), but now it’s about 10 million won. Many projects were contracted at the lower price, so the cost difference is causing losses.”