Samsung, Hyundai engineering units to post record earnings on overseas orders
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According to FnGuide on Sunday, Samsung Engineering, the only pure-play engineering, procurement, and construction (EPC) company in Korea, is expected to raise an operating profit of 755.5 billion won ($577.8 million) this year, the highest in 10 years since 2012. The company recorded an operating profit of 702.9 billion won last year, up nearly 40 percent compared to the previous year, exceeding 700 billion won for the first time since 2012.
The company’s revenue also increased by 36.37 percent from the previous year to 10.05 trillion won, successfully returning to the 10 trillion won sales club for the first time in 10 years.
Hyundai Engineering, a subsidiary of Hyundai Engineering &Construction Co., is expected to reach 814.6 billion won in operating profit this year, up 41.69 percent from a year ago thanks to the improvement in overseas business. Samsung Securities Co. estimated that Hyundai Engineering’s revenue for this year would increase by 13.89 percent on year to 10.04 trillion won.
Samsung Engineering’s earnings improvement this year looks different from a situation 10 years ago when it eventually recorded operating losses due to excessive price competition overseas.
In the past, overseas orders were limited to simple construction or EPC, but now they come with better quality with more efficient and stable projects that encompass the front-end engineering design (FEED), which means basic engineering conducted after completion of conceptual design or feasibility study.
Since then, its performance has steadily improved, but until 2020, the increase was limited due to overseas business losses with reduced Middle East orders.
However, starting with the Qatar LNG terminal construction project order in 2021, Samsung Engineering went aggressive in winning new orders overseas, accelerating its operating profit growth.
Samsung Engineering set a new goal of achieving 12 trillion won in new orders for 2023 after surpassing its 2022 target of 8 trillion won with 10.23 trillion won in new orders last year.
Potential contracts for the company in the second half of the year include the $2.5 billion North American liquefied natural gas (LNG) plant project and the $1.5 billion Hail & Ghasha project in the United Arab Emirates (UAE).
In the first half of 2023, the company is poised to see its efforts bear fruit in multiple projects such as Jordan Zarqa worth $1 billion, Algeria STEP worth $1.4 billion, and Indonesia Chandra $700 million.
Hyundai Engineering’s performance is also expected to improve on an increase in overseas orders over the past two years. This year, the company set a new overseas order target of 5.7 trillion won, which is more than double its 2022 target of 2.9 trillion won.
In July of last year, Hyundai E&C secured an exclusive position to clinch a new order from Saudi Arabia’s energy company Aramco and won a part of Neom City-related orders. The company recently filed for bids to participate in Saudi Arabia’s $4.5 billion Amiral Petrochemical Complex project and $1.5 billion phosphate petrochemical plant.
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