Kumho Engineering & Construction posts 30.6% rise in first-half operating profit

Kumho Engineering & Construction improved both its profitability and financial structure in the first half of this year. Operating profit and net profit for the period rose on the back of a better cost ratio and lower financial expenses, while its debt ratio and borrowings also fell.

The company reported consolidated sales of 965 billion won ($682 million), operating profit of 28.6 billion won and net profit for the period of 24.4 billion won for the first half of this year, it announced Thursday.

Sales edged down from the same period last year, but the cost ratio improved from 94.6% to 93.2%. Tighter cost management at project sites and a focus on profitability-driven operations pushed operating profit up 30.6%, from 21.9 billion won a year earlier to 28.6 billion won. The operating margin rose from 2.2% to 3.0%.

Net profit for the period surged 117.9%, from 11.2 billion won to 24.4 billion won year on year. The company said the gains reflected the improved cost ratio and a reduction in financial expenses.

Second-quarter earnings also improved from the first quarter. On a consolidated basis, second-quarter sales came in at 511.6 billion won, operating profit at 16.5 billion won and net profit for the period at 13.6 billion won. Compared with the first quarter, sales rose 58.2 billion won, operating profit gained 4.4 billion won and net profit for the period increased 2.8 billion won.

The company's financial structure also strengthened. The consolidated debt ratio stood at 405.5% and the separate debt ratio at 393.3% for the first half. The consolidated debt ratio fell 145.6 percentage points from the first quarter, and the separate debt ratio dropped back into the 300% range.

Borrowings continued to decline. On a consolidated basis, total borrowings fell from 157.1 billion won at the end of last year to 131.1 billion won at the end of the first quarter, and further to 128.6 billion won by the end of the second quarter.

"Both earnings and the financial structure have improved through profitability-focused project management and rigorous cost control," a company official said. "We will continue to secure a stable earnings base and strengthen our financial soundness through selective order-taking and cost management."

Meanwhile, Kumho Engineering & Construction has been drawing attention from the market amid growing expectations over the government's plan to fast-track ground-breaking on a semiconductor cluster in the Honam region. Although the company's head office is in Seoul, it maintains its registered principal office in Naju, South Jeolla Province, making it a representative Honam-region construction company. Buoyed by those expectations, the stock hit the daily upper limit for two consecutive sessions on Tuesday and Wednesday, posting a sharp rise in its share price.