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Daewoo Engineering & Construction. (Photo courtesy of Daewoo E&C) |
[Alpha Biz= Kim Jisun] Over KRW 1 trillion loss shakes financial stability, raising concerns over cash flow and leverage
Despite taking a “big bath” by recognizing large-scale potential losses in the fourth quarter of last year, Daewoo Engineering & Construction (Daewoo E&C) has failed to ease concerns among credit rating agencies, which have responded by downgrading their outlooks on the company’s credit profile.
According to industry sources on Feb. 18, Korea Ratings and NICE Credit Rating maintained Daewoo E&C’s unsecured bond rating at “A” but revised the outlook from “Stable” to “Negative.” The move follows the company’s recognition of massive operating losses after reassessing cost ratios at domestic and overseas projects during its year-end financial closing.
Daewoo E&C disclosed on Feb. 9 that it posted consolidated revenue of KRW 8.05 trillion last year, alongside an operating loss of KRW 815.4 billion. Net loss totaled KRW 916.1 billion. The losses stemmed from the one-off recognition of bad-debt provisions at domestic housing sites and additional costs at overseas civil engineering and plant projects.
Losses were incurred both at home and abroad. Domestically, approximately KRW 595 billion in bad-debt expenses arose from unsold apartment projects and knowledge-industry centers. Overseas, around KRW 660.4 billion in additional costs were booked at projects including the immersed tunnel in Iraq, an urban railway project in Singapore, and an LNG plant in Nigeria.
As a result of the strategic loss recognition, Daewoo E&C’s financial indicators deteriorated sharply. Its debt-to-equity ratio surged from 192.1% at the end of 2024 to 284.5% at the end of 2025, an increase of 92.4 percentage points. Total equity fell from KRW 4.3 trillion to KRW 3.5 trillion over the same period.
Credit rating agencies warned that restoring financial stability would take time. Despite clearing potential risks upfront, Daewoo E&C continues to face weak operating cash flow and a heavy debt burden.
Kim Hyun, a senior analyst at Korea Ratings, said that “given uncertainty in the housing market and geopolitical risks tied to overseas projects, it will take time for the company to generate stable operating cash flow and improve its financial structure through receivables recovery.” He added that further losses and cost ratio improvements should be closely monitored.
Concerns over liquidity management were also raised. Yook Sung-hoon, a senior analyst at NICE Credit Rating, noted that “capital buffers have weakened following the large loss recognition, while net debt remains at a burdensome level,” stressing the need to monitor refinancing risks and the company’s ability to roll over maturing debt amid shifts in market confidence.
Daewoo E&C is an affiliate of the Jungheung Group, with Jungheung Construction (40.6%) and Jungheung Togen (10.15%) jointly holding a 50.75% stake. While group-level support remains a possibility, analysts say improving the company’s own cash flow generation has become an urgent priority.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
