Major domestic construction firms saw their operating profits surge more than 50% year-on-year in the first half of this year, yet their revenue uniformly contracted, deepening what analysts describe as a "recessionary profit" pattern. Profits improved as most low-margin sites with high cost ratios were cleared out, but a prolonged slump in the nationwide housing market—outside Seoul and parts of the greater metropolitan area—caused new construction starts to plunge, showing up as a revenue vacuum.
According to the Financial Supervisory Service's electronic disclosure system on the 23rd, among the top 10 construction firms by construction capacity, eight companies—excluding Samsung C&T and SK ecoplant, whose group semiconductor and high-tech sales make up a large share—saw first-half revenue drop uniformly by 6–23% year-on-year. These eight were Hyundai E&C, Hyundai Engineering, GS E&C, Daewoo E&C, DL E&C, Lotte E&C, POSCO E&C and HDC Hyundai Development Company. The combined first-half consolidated revenue of seven firms, including Hyundai E&C with Hyundai Engineering, was 34.1445 trillion won, down 12.6% from 39.0888 trillion won a year earlier.
By contrast, the seven firms' first-half operating profit surged 57.1%, from 1.2013 trillion won to 1.8868 trillion won. Analysts see this as a textbook "recessionary profit" pattern. While large housing and building projects saw construction starts pushed back one after another amid permit delays and disputes over increased construction costs—widening the revenue gap—the high-cost sites that had previously weighed on earnings were completed in succession, easing only the cost-ratio burden.
An industry official said, "As the low-margin apartment complexes that broke ground during the 2021–2023 surge in raw material and labor costs were completed one after another, the cost-ratio burden eased significantly." He added, "Because of rising construction costs, the cost ratio itself remains high, but the remaining projects have widely incorporated clauses linking cost fluctuations to construction fees, so 'cost shocks' like those in the past will diminish."
A "big bath" effect—writing off long-overdue receivables all at once—also supported the profit rebound. Daewoo E&C, which preemptively cleared some 800 billion won in losses in the fourth quarter of last year, saw first-half revenue fall 8.2% to 3.9949 trillion won, but its operating profit jumped 108.9% to 487.9 billion won.
Some note that such a revenue vacuum is paradoxical given the order backlogs. Hyundai E&C recorded 103.9831 trillion won on a consolidated basis in the first half, its largest backlog since founding, while GS E&C, Daewoo E&C and POSCO E&C also amassed more than 50 trillion won each—equivalent to at least three to four years' worth of work.
Experts attribute this to the sluggish virtuous cycle from "construction start to revenue," despite ample backlogs. In particular, for private housing projects such as urban redevelopment, surging construction costs, interest-rate burdens and the housing market slump have worsened profitability, leaving many sites unable to break ground for years even after winning the contracts.
Lee Ji-hye, a research fellow at the Construction & Economy Research Institute of Korea, said, "The Bank of Korea's tally showed the construction industry's first-quarter revenue growth rate at -4.03%, marking seven consecutive quarters of contraction, and this half-year performance also shows a clear recessionary profit pattern, including shrinking scale." She added, "As long as new construction starts continue to be delayed amid the housing market slump and suppressed demand, construction firms' earnings stagnation and downturn are likely to persist for some time."
