Hit hard by the prolonged economic slump at home and abroad and the depreciating Japanese yen, many of the nation’s major companies suffered a sharp fall in sales or operating profits during the first quarter of this year.
Particularly, massive losses recorded by some leading builders sent shockwaves through the nation.
While the frontrunners continued to struggle, however, an expected surprise came from those that usually lagged behind, many of which outran their dominant rivals.
The steel industry, one of the most important industrial sectors, visibly foundered during the first three months of the year.
The top steelmaker POSCO saw a 10.6 percent drop in its total quarterly sales and 6 percent in its operating sales.
Hyundai Steel Co., too, saw a 21.7 percent and 23.4 percent fall, respectively, in its quarterly sales and profits.
It was Dongkuk Steel, No. 3 in line, which displayed visible growth by turning its operating profit to 47.9 billion won, a 221.3 percent leap from minus 395 billion won in the first quarter of last year.
“The total sales level fell slightly, but we were able to restructure our profit system and expect to maintain this throughout the year,” said a company official.
This was largely attributable to the company’s relatively small size and compact business structure, the official also said.
“Our focus will be the manufacture of high value-added products such as steel pipes specialized for marine plants or liquefied natural gas ships,” he said.
Things were even more dramatic in the struggling construction sector.
The nation’s fourth-largest builder GS Construction & Engineering earlier jolted the entire industry by announcing an unprecedented operating loss of 535.5 billion won ($482.6 million) in the first quarter of the year.
Other rivals such as Samsung Engineering and Daewoo Engineering & Construction, too, recorded operating losses.
Daelim Industrial, however, recorded 2.5 trillion won in quarterly sales and 124 billion won in operating profit, respectively 22.7 percent and 31 percent up from the previous year.
The growth largely reflects Daelim’s success in the overseas market and conservative marketing, according to company officials.
The proportion of the company’s overseas sales increased steadily from 19.7 percent in 2010 to 26.1 percent in 2011, and 38.6 percent last year.
“The most important factor is, however, not just the number or size of the overseas sales but the level of the actual profit,” a company official said.
“Our key principle is to remain conservative in overseas construction bids, which means that we will not endure low margin profits just to win deals.”
The problem of a low margin profit structure has recently been pointed out as a critical weakness for local construction companies.
The builder also focused its business power on specific projects, such as electric power plants in the Middle East and Southeast Asia.
Daelim was the first Korean company to build an overseas power plant in Saudi Arabia back in 1973, as well as the first one to record an accumulated order amount of $15 billion there.
“We refrained from expanding our business rashly and chose to focus on our fortes,” the official said.
In the shipbuilding industry, one of the nation’s representative businesses, Samsung Heavy Industries stood head and shoulders above its rivals, by announcing a quarterly report which came far above the local stock market’s expectations.
The company recorded 3.9 trillion won in sales and 440.2 billion won in profits, which were a 9.9 percent and 18.9 percent rise from the previous year.
This was a far better performance than the frontrunner Hyundai Heavy Industries, which saw a 61.7 percent fall in its quarterly operating profit.
Its strategy was to focus on the construction of drill ships and to maintain its dominant position in the world market, according to officials.
Samsung Heavy Industries has so far won 58 of the total 138 drill ship orders worldwide, achieving a market dominance of 48 percent. Last year, it also achieved total sales of $4.9 billion in drill ships alone.
“When the local shipbuilding industry was still preoccupied with bulk carriers and container ships, we chose to invest in the high value-added drill ship business,” said a company official.
“Such efforts and investment are now taking effect, resulting in actual orders.”
The company will also work on the liquefied natural gas carrier ship market, which is expected to flourish for several decades in the future, the official added.
By Bae Hyun-jung (
tellme@heraldcorp.com)
