After work, I was going through the financials of a major Korean construction company and had to pause. Hyundai E&C: ₩32 trillion in revenue. Yet in 2024, an operating loss of ₩1.2 trillion. Revenue of ₩32 trillion, still in the red.
That same year, SK Hynix posted ₩66 trillion in revenue with ₩23 trillion in operating income — a 35% margin.
Put those numbers side by side and one question emerges. Why is the construction industry structurally incapable of making money? And is this a Korea problem, or a construction problem?
Korean Construction Results: 93% Cost Ratio on ₩32 Trillion Revenue
The 2024–2025 results for major Korean construction firms make the picture stark.
Samsung C&T's construction division posted ₩18.6 trillion in revenue with ₩1 trillion in operating income — a 5.4% margin. That's the industry's best. GS Engineering came in at 3.7% after stabilizing cost ratios, Daewoo E&C at 3.8%, DL E&C at 4.3%. Hyundai E&C reflected a massive lump-sum overseas plant loss in 2024, finishing at -3.7%, before returning to profitability in Q1 2025.
There is an informal industry benchmark: a 3% operating margin is considered "positive." Three percent is the target.
The cost ratio is the key variable. Revenue cost ratios at major construction firms: POSCO E&C 95.4%, Hyundai E&C 93.5%, GS Engineering 90.7%, Samsung C&T Construction 89.4%. For every ₩100 in revenue, ₩88–95 goes straight to costs. Factor in SG&A and you can imagine what's left.
Why does this structure exist? You have to look at the business model itself.
EPC Incentive Structure: Why Profit Is Hard to Generate When Orders Are the KPI
The core business model for construction firms is EPC — bundling Engineering, Procurement, and Construction into a single contract, receiving payment upon project completion.
The operating logic makes the answer obvious. Without orders, the company doesn't run. So every KPI in the organization naturally gravitates toward order value. Large orders make team numbers look good, fill executive targets, and demonstrate growth to investors.
The problem is that order value is not profit.
A construction project typically runs two to five years from groundbreaking to completion. The costs estimated at award differ from actual costs. Labor goes up, materials go up, field variables emerge. In the early phases of a project, revenue is recognized and margins look decent. The problem is that remaining costs pile up and get recognized all at once as completion approaches.
Hyundai E&C's 2024 loss is a case study. A single overseas plant project's losses were reflected in a lump sum, producing the company's first annual loss in 23 years. The industry calls this "big bath accounting" — a management transition moment when latent problems are written off all at once. The fact that this concept exists at all is evidence of structural fragility.
The loop runs like this: more competitive bidding drives down contract prices, lower prices compress margins, and thinner margins require even more order volume to keep the organization running. Revenue scale and profitability move in opposite directions. Everyone inside the organization is naturally incentivized to chase more orders.
Are Foreign Construction Firms Different? The Secret Behind VINCI's Margin
Do the global construction giants operate differently?
VINCI reported group-wide revenue of approximately €71.6 billion in 2024 with a 12.5% operating margin — vastly better than Korean peers on the surface. But look inside the numbers.
VINCI's construction division alone: 4.1% operating margin. Comparable to Samsung C&T, Korea's best-in-class. The margin construction itself generates is not substantially different across countries. VINCI's high group margin comes not from being a better construction company, but from its concession business.
VINCI's concession segment operates 4,400 km of French motorways and 45 airports worldwide. Tolls and airport fees are collected daily, on repeat. Contracts run 20 to 75 years. This segment is 16% of group revenue — but contributes 65% of operating income.
Sweden's Skanska: 3.5% margin on its construction division. US-based Fluor: 2.8% on approximately ₩22 trillion revenue. Even global EPC specialists land in the same margin band. Bouygues runs its construction business at roughly 3.5%, with the parent company reaching 4.5% total.
The point is consistent: any company that lives on construction alone generates low margins, everywhere in the world. High operating margins require a different business sitting on top of construction.
Ferrovial is the extreme case. By steadily increasing the concession weight — Canada's 407 ETR highway, Texas managed lanes — its construction EBIT has cleared 40%. This company is no longer a construction firm; it's an infrastructure operator.
SK EcoPlant: A Transformation Experiment in Progress
The most aggressive attempt to change this structure inside Korea is SK EcoPlant.
By 2025, semiconductor-related revenue accounts for nearly 70% of the company's total. It has absorbed four semiconductor materials subsidiaries (SK Trichem, SK Resonac, others), directly supplying process gases and materials to fabs. It also won the EPC contract for SK Hynix's Cheongju M15X and Yongin semiconductor cluster.
Full-year 2025: ₩12.2 trillion revenue, ₩315.9 billion operating income. Revenue up 39.6%, operating income up 39.8% year-over-year. Q1 2026: revenue nearly doubled year-over-year, operating income ₩931.4 billion.
One distinction needs to be made here. SK EcoPlant's profits are not coming from construction EPC. Its traditional construction division — including residential and general building — still ran at a loss. The earnings are from semiconductor materials sales, gas supply, and module recycling.
SK EcoPlant is performing well not because it's a better construction company. It's performing because it shed the construction company identity and became a semiconductor materials and distribution business. Annualizing Q1 2026 figures, high-tech revenue represents roughly 97% of total. It's difficult to call this a construction firm anymore.
What It Would Take for Construction Companies to Change Their Margin Structure
Looking at domestic and global data together, a consistent pattern emerges.
Structural operating margin expansion is not achievable through EPC construction alone. As long as there are clients, competitive bidding, and external cost variables, the margin ceiling stays low. No construction firm anywhere in the world generates 10%-range margins from EPC contracting alone.
Every company that achieved higher margins did one of two things: held assets generating recurring revenue (VINCI, Ferrovial), or replaced construction itself with a higher-margin industry (SK EcoPlant).
The first path is the concession or developer model — retaining assets after construction and capturing operating returns. High upfront capital, regulatory barriers, but once established, recurring revenue measured in decades. The second path is de-construction transformation — using construction capabilities as a launchpad into higher-margin industries.
Korea's major construction groups are currently deferring the decision on which direction to take. Samsung C&T maintains relatively healthy margins through semiconductor factory contracts, but remains dependent on group-affiliated orders. Hyundai E&C is attempting portfolio diversification into nuclear power and data centers — still within the EPC structure, portfolio rebalancing rather than structural change.
Asking whether a construction company can become SK Hynix is probably the wrong question. The more precise question is: how long will it take for construction companies to recognize the structural limits of their margin profile, and decide to move beyond them? And if SK EcoPlant survives this transformation, could it define where Korean construction goes next?
This article is for informational purposes only and does not constitute a recommendation to buy or sell any specific security. All investment decisions and their outcomes are the sole responsibility of the investor.