A Towering Performance

GS E&C becomes triple crown winner tops in sales, orders and profit

GS Engineering and Construction Corp. said its net profit in the first quarter jumped 86.2 percent year-o-year on brisk overseas plant construction and cost-cutting, amounting to $92.2 million, compared to 46.5 billion won in the same period last year.
Operating profit increased 52.8 percent to 71.8 billion won compared to 47 billion won in the same period a year earlier, but sales fell 3 percent to 1.17 trillion won from 1.2 trillion won.
The company has done exceedingly well last year, winning the triple crown by coming on top in three major sectors of corporate performance results, sales, orders, and net profit. The envious record surprised the industry as it came after just a year since the company split from LG Group and became part of the GS Group, which also includes GS Caltex Corp., the nation's second largest oil refinery. The company has been doing well in both home and overseas sectors of its vast operations.
The company did well in overseas construction last year with its sales amounting to 909 billion won, up 119 percent from the previous year. In 2003, the company's sales amounted to 264.1 billion won, showing that its sales quadrupled in two years.
Overseas construction orders totaled 1.09 trillion won last year, breaking the 1 trillion won level since the establishment of the company.
One of the most surprising projects that the company won overseas is the Ho Chi Minh City development project. The project includes the construction of a large urban town, a 54-story building, the XI Park Tower, the tallest in Vietnam, and four office, commerce and residential complexes, all of them to be completed in 2021 at the cost of $1.3 billion. On the bank of the Ho Chi Minh river that cuts across the city is a huge ad board with the smiling actress Lee young-ae as a model. The 54-story building with apartments, and shopping malls will be built on a 4,000 pyeong lot in downtown Ho Chi Minh city. The company will also build an urban town on a 1 million pyeong area with 17,000 residential houses by 2019.
The area is located 10 km from Ho Chi Minh City. The project is to cost over $10 billion, the largest overseas construction project for Korean builders so far, company officials said. The company got the project in return for the 14 km highway that the company built outside Ho Chi Minh City at the cost of $150 million for the Vietnamese government free of charge. The company plans to undertake the project step-by-step in 12 to 15 years to complete.
GS Construction has been focused on both real estate development projects and plant construction works overseas. The company's technology for plant construction including oil refining and petrochemical installations won international recognition The company won a petroleum plant construction project worth $660 million from ATC Co. in Thailand in consortium with SK Construction and has been working on to win a oil plant project in Oman and a plant construction work in Nanjin, China, in addition to a resort construction project in Korea.
The company will continue to win oil refinery construction projects and petrochemical plant projects around the world, while continue to working on winning gas to liquid projects, Woo Sang-ryong, senior executive vice president of the company's plant construction division said.
Projects in the Middle East take up about 59 percent of the company's overseas work. New orders and sales revenue in 2005 recorded 524 billion won and 533 billion won respectively in the region. Most of the projects in the region are oil and gas projects. The company also has projects in Southeast Asia, China, Poland and Russia. About 36 percent of the company's overseas work is located in China based on 2005 sales. These projects consist of office buildings, factory buildings, and aromatic plants. Orders and sales in China recorded 262 billion won and 327 billion won, respectively in 2005.
A steady flow of work in China has resulted in improved competitiveness and better local marketing networks. GS E & C plans to diversity its business portfolio by regions in China, with the technology expertise gained in building the Beijing Tower.
The company also built various plants in Taiwan and Thailand, and is currently working on a $660 million aromatics plant project in Thailand with the company's share to amount to $240 million, in addition to $1.3 billion urban development project in Vietnam.
On the home front, GS Construction plans to build 13,000 housing units this year, up 60 percent from last year with the most projects located in Yongin area benefiting from the Pangyo apartment project, which was a great success. About one/third of the residential housing units or 3,972 housing units will be built and sold in Seongbuk-dong in Yongin near Seoul. The company built 10,539 housing units in the area including Shinbong-dong, and Sanghyun-dong, which will make the area known for the company's "xi"brand apartments, in fact, becoming a "xi Town."President Kim Kab-ryul stressed that he will make the town famous by the company's construction brand name, "xi."GS Construction achieved a great success in the area, which every construction firm avoided after the financial crisis of 1998, due to the company's correct market study and the decision to build luxury-type apartments in the area.
The company planners knew that the area had the potential to be a popular residential area south of Seoul and built high-rise and large apartments with a great success there.
The strong point for the company has been its balanced business portfolio. Its business sectors, construction, housing and plants, achieved balanced growth. In addition, overseas project orders and environment projects have been rising fast.
Total sales comprised 36.5 percent in construction, 25.3 percent in residential houses, and civil engineering and plants 16 percent.
The company has been working under the Vision 2010 mid-long-term plan to boost its sales to 9 trillion won, and project orders to 12 trillion won a year. Industry experts hold a positive view of the plan. An analyst with Hanhwa Securities said GS Construction is likely to maintain its leading position in the industry in terms of sales, and order backlogs for a considerable time due to its accumulated technology on the construction of high-tech plants such as those for LCD, and PDP in addition to its experience of having built luxury houses under its brand name strategy in the housing construction sector.
President Kim at the beginning of the year, said that the company's key objective this year is to bring cost down under the cost innovation plan. He said the company has succeeded in building its competitive operational base and what it needs is detailed strategies and realignment of systems to back up the company's expanded business scale. Last year, the company recorded one of its highest operation records, but it still has many things to do, which is why he is trying to cut costs under the cost innovation plan.
The company expects its plant and housing divisions will undertake more projects this year than last year and bring its annual sales to 6 trillion won. In 2006, the company will seek to bid on projects with high profit margins, the CEO said.
The company will be selective about the projects, only bidding for projects that will bring high profits to the company and in the areas the company is most competitive. In order to do that the company will try to expand its market and enter new business areas where new technologies are applied. This balanced approach regarding quantitative growth and profits will be the key to reach its gross profit target of 737 billion won this year.. nw

GS Engineering & Construction Co. Chairman
Hur Chang-soo

TPC-VCM Plant built by GS E & C in Thailand.

LG Polycarbonate Plant built by GS E & C in Yeosu, South Jeolla Province.