쌍용건설

After a 3-year loss that led the company to be on the verge of bankruptcy, Ssangyong E&C, an ICD company, is winning in many bidding wars.

POSCO E&C still bears the pain of the downtime after inducing investments from the Middle East.

Two Korean contractors inducing investments from the state-owned Middle Eastern investment funds are facing different futures, as a strategic investor (SI) in a Korean contractor that has become a subsidiary of the investor strives to win a number of projects, while a financial investor (FI) meets a tragic end as the stock price of its investee falls by a half. &ldquoBetween the two, there was an obvious winner who made its business profitable by making the managerial performance accountable as a subsidiary. This should be considered for the sale of Daewoo E&C on which a Middle Eastern fund has shown its interests,&rdquo an executive investment banker said.

According to a source from the investment banking industry, Ssangyong E&C has turned profitable since January 2015 when Investment Corporation of Dubai (ICD) acquired 94% of the company&rsquos shares, ending the 3-year loss caused by the breakdown of negotiations between The Military Mutual Aid Association of Korea, the majority shareholder, and other minority shareholders. Ssangyong made operating profit of KRW 28.4 billion, marking a successful turnaround in 3 years, while there was a slight decrease in sales (down to KRW 862.5 billion), thanks mostly to collaboration with ICD. &ldquoICD wanted to expand its portfolio by adding a contractor like Ssangyong E&C that is capable of serving the rest of ICD&rsquos affiliates,&rdquo said a representative from Ssangyong E&C. As part of a number of ICD projects, worth KRW 22 trillion in total, Ssangyong E&C has won multiple projects worth KRW 1.9 trillion, including the construction of The Royal Atlantis Resort & Residencies and Palm Gateway, a luxurious waterfront living and leisure complex in Dubai.

It was POSCO E&C, however, continuing to struggle even after the investment from Public Investment Fund of Saudi Arabia (PIF), a sovereign wealth fund of Saudi Arabia. The company&rsquos stock price has plunged by half. On June 2015, PIF purchased 38% of the POSCO E&C shares at KRW 70,000 per share, which was overpriced with the expectation that the company would soon become a KOSPI-listed company. POSCO E&C share is now worth KRW 30,000 in the over-the-counter market. The operating loss of POSCO E&C for Q4 2016 was KRW 509 billion, a drastic fall compared to that of Q4 2014 when the figure was as high as KRW 323 billion. Annual sales also decreased from KRW 9.58 trillion to KRW 7.128 trillion for the same period due mostly to losses incurred by overseas projects. POSCO&rsquos CSP steel mill in Brazil, worth over KRW 4 trillion itself, gave rise to losses of KRW 421.9 billion that affected both POSCO E&C and its Brazilian branch, not to mention the ARAMCO Sulfate Transport Plant that also incurred a loss of KRW 99.3 billion. Industry experts say only the domestic house projects are viewed profitable, but there still are payment risks where purchasers may not be able to meet the payment schedule after purchasing. &ldquoA Middle Eastern shareholder helping winning projects from the Middle East? It is an absurd dream&rdquo, a banker says.

POSCO E&C&rsquos massive scope of business makes it very difficult for PIF to dispose of some of its shares, while POSCO Corporation, a parent company of POSCO E&C, won&rsquot agree to have PIF acquire the entire POSCO E&C. This might be one of the reasons why PIF appears to be becoming more scrupulous regarding POSCO E&C by requesting that the company submit in-depth project budget lists.