Lotte Engineering has demonstrated a significant turnaround this year, focusing on improving its financial structure and profitability. The company’s selective bidding strategy and enhanced cost management have yielded notable results.
According to data from the Financial Supervisory Service on May 16, Lotte Engineering reported consolidated sales of 1.6012 trillion won, an operating profit of 50.4 billion won, and a net profit of 17.1 billion won for the first quarter. Notably, the operating profit surged approximately 13 times compared to the same period last year, which recorded only 3.8 billion won. The net profit also increased 4.5 times from the previous year’s 3.8 billion won, indicating a clear turnaround.
The primary factor behind this strong performance is the company-wide improvement in cost rates. The cost rate for the first quarter was 91.7%, down 3.7 percentage points from 95.4% in the same period last year.
The reduction in revenue from high-cost projects, coupled with a rigorous monitoring system that improved profitability at various sites, has been credited with stabilizing the cost rate.
The debt ratio for the first quarter fell to 168.2%, down 18.5 percentage points from 186.7% at the end of last year, continuing its improvement below the 200% threshold.
Concerns regarding project financing (PF) contingent liabilities have also largely been resolved. The scale of PF contingent liabilities, which stood at 3.15 trillion won at the end of last year, decreased to 2.97 trillion won in the first quarter, a reduction of approximately 180 billion won, bringing it below the 3 trillion won mark. This level is considered stable, as it is below Lotte Engineering's equity of 3.5249 trillion won. The company plans to reduce contingent liabilities to the low 2 trillion won range by the end of the year through the transition to main PF.
With a strengthened financial position, Lotte Engineering is also enhancing its business competitiveness. In the urban redevelopment sector, led by its premium brands 'Lotte Castle' and 'Leal,' the company has secured contracts for significant projects this year, including the reconstruction of the Garak Geukdong Apartments in Songpa District (484 billion won), the redevelopment of the Kumho District 21 in Seongdong District (624.2 billion won), and the reconstruction of the Yongho District 3 in Changwon (396.7 billion won), totaling 1.5049 trillion won in contracts. The company plans to further develop its capabilities as a comprehensive developer by utilizing real estate owned by group affiliates.
The diversification of liquidity acquisition methods has also received positive feedback. Recently, Lotte Engineering became the first in the industry to develop asset-backed securities (ABS) using construction receivables from nearly completed projects, issuing AAA-rated bonds to raise 300 billion won. By issuing bonds with a rating higher than its own credit rating (A0), the company significantly reduced financing costs and enhanced market confidence.
A Lotte Engineering official stated, “Our efforts to strengthen management have resulted in tangible improvements in financial indicators,” adding, “We will solidify our long-term growth momentum based on stable urban redevelopment competitiveness and group-linked developer capabilities.”
According to Lotte Engineering, the proposed expansion of the 'group-linked developer business' is an extension of the management policy announced during a town hall meeting by CEO Oh Il-geun in March, reflecting his strong commitment as a development expert. The company is reportedly beginning long-term reviews of some sites owned by affiliates in Seoul.
A Lotte Engineering representative noted, “The group-linked developer business utilizing affiliate sites has not yet determined specific projects, but it has set a long-term growth direction. Given the nature of large-scale mixed-use developments, there are many prerequisites such as consultations with permitting agencies, and we plan to solidify a visible blueprint within the next 2 to 3 years.”
* This article has been translated by AI.
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