South Korea’s GS Engineering & Construction Corp. is raising hopes to return to its heyday of 2008-2011, when its annual operating profit averaged 450 billion won ($394 million) as it expects a dramatic pickup in this year’s performance due to steady housing demand at home and improvement in overseas projects.

GS E&C earnings will look different this year from the past two years when the average operating profit was 130 billion won. According to analysts from nine securities firms polled by FnGuide, the company’s full-year operating profit will surge nearly 160 percent on-year to 370 billion won this year. Sales are estimated to grow 7.4 percent to 11.84 trillion won from 11 trillion won last year with net income returning to a black figure of 213.6 billion won from a net loss of 20.4 billion won.

Shares of GS E&C were up 1.57 percent to close at 32,250 won Wednesday.

The housing and construction sector, which had offset losses from overseas operations, would remain as main profit driver. Profits are expected to be realized through the completion or sale of about 70,000 residential constructions of the past three years. According to financial investment industry sources, GS E&C`s construction and housing division is projected to post 6 trillion won in sales, up more than 30 percent from a year ago, generating an operating profit of 600 billion won on an operating margin of more than 10 percent.

The housing sector is also highly profitable.. The division’s gross margin hit 15.3 percent last year, a stark contrast to that of plant and electricity sectors which recorded -7.2 percent and -2.6 percent, respectively. The cost level in the commercial and housing business unit was stabilized to the 80 percent level, 10 percent lower than other business divisions of the company.

Solid new home sales also brighten its earnings forecasts. According to NH Investment & Securities, new homes sales will reach about 220,000 households in the first half of this year alone.

Improvement is also expected from the overseas division, which had weighed on its income statement for the past few years. The number of money-losing budget projects fell to two this year from seven last year, according to Park Sang-yeon, a researcher at Shinhan Financial Investment.

By Lee Yong-gun

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