이 기사는 2021년 11월 30일 08시06분 thebell에 표출된 기사입니다

S&I Corp, part of South Korean conglomerate LG Group, is set to offload its construction division to GS Engineering & Construction (GS E&C) amid poor financial performance in recent years.

S&I Engineering & Construction (S&I E&C), which was founded in October as a spinoff of S&I Corp, recorded revenue of 791.4 billion won ($663 million) in the third quarter on a consolidated basis, up 5% from 747.7 billion won a year earlier. S&I E&C is expected to deliver revenue of about 1 trillion won this year.

Reveue of S&I Corp’s construction business continued to grow until 2018, from 1.3 trillion won in 2016 to 2.02 trillion won in 2017 and 2.2 trillion won in 2018.

However, its revenue sharply decreased to 1.74 trillion won in 2019 and 1.05 trillion won in 2020. The share of the construction business in S&I Corp’s total revenue has also decreased, from 74% in 2018 to 62% in 2020 and 59% in the third quarter of this year.

The poor performance is mostly due to a decline in orders from LG's affiliates. This year and last year, S&I E&C completed the construction of LG Science Park's east section, LG Chem’s electric vehicle (EV) battery plant in Poland, and its second EV batteries factory in Binjiang, China. It also completed the construction of LG Chem’s plant in Yeosu, South Jeolla Province, in August.

However, S&I E&C is expecting orders from LG's affiliates to grow in 2022, particularly from LG Chem and LG Display. LG Energy Solution Michigan, LG Chem’s subsidiary, plans to raise 1.6 trillion won through a capital increase and borrowings to invest in facilities. With LG Energy Solution seeking to expand its EV battery plant in North America, market insiders are paying attention to whether S&I E&C would win orders from the company. LG Chem has decided to invest 500 billion won in Gumi, North Gyeongsang Province, to build a secondary battery cathode material factory.

LG Display also announced a 3.3 trillion won investment to increase its capacity to produce small and medium-sized organic light-emitting diode (OLED) panels in August. S&I E&C is expected to participate in the construction project.

S&I E&C is highly likely to take orders from LG's affiliates in the future as it has constructed most of the group’s EV battery, display, and electronics facilities, where security is important due to the nature of the business.

Market insiders said LG Group would assure a certain level of orders for S&I E&C to have an edge in negotiations with GS E&C and sell the business at a higher price. (Reporting by Jeong-wan Lee)