This year has been hard on local builders after a years-long market slump and low-priced orders. And unprecedented operating deficits in the first half of the year only made matters worse.

Amid deepening woes, GS Engineering & Construction, the nation’s sixth-largest builder, sent shockwaves throughout the industry by marking 535.4 billion won ($506 million) in losses in the first quarter.

Concerns among the industry escalated further as the company became recently involved in a series of domestic lawsuits filed by the residents of its signature apartments in Gangnam, asking for compensation for damage repair.

It has also been plagued by rumors that its key executive members will be reshuffled within the year to take responsibility for the persistent losses.

Despite the prevailing cynicism in the market, it is GS E&C’s claim that the worst of the financial crisis is now over and that it has successfully diversified its business portfolio.

“This year’s business performance was mostly based on our past deals, dating back two to three years,” said an official of GS E&C.

“But our recent portfolio, especially after the first quarter, has largely been conservative, focusing on high-profit orders.”

As of the end of October, the builder’s cumulative operating deficit reached 799.3 billion won. Though the amount is considerable, most of it was made in the first quarter and the quarterly deficit has narrowed steadily, the official explained.

“Also, we are scheduled to have a personnel change in early December, but this is only part of our regular timetable, not a sanction upon specific members,” he said.

Meanwhile, the residents’ compensation claim is not likely to expand into a massive lawsuit as the legal representative must first acquire the written consent of all the residents, the official explained.

The International Contractors Association of Korea, too, agreed with the builder’s optimistic analysis, though it also expressed some concern over its future outlook.

“The massive operating loss of some of the top builders rang the alarm in the entire construction industry, putting an end to the low-profit orders,” said an official of the ICAK.

The constructor, however, will have to improve its order management control capacity in order to prevent financial risks in the future, he added.

To make up for its past losses, the builder is currently stepping up the momentum in its overseas projects, including a 1.5 trillion won deal to build a petrochemical plant in Kazakhstan and 1.1 trillion won oil refinery construction in Turkey, officials said.

By Bae Hyun-jung (tellme@heraldcorp.com)