Good afternoon. I would like to thank everyone joining Samsung C&T's third quarter for 2026 conference call. Good afternoon. We will now begin Samsung C&T's earnings announcement for the third quarter of 2026. Today's speakers will be Vice President Chanmu Kim, the Head of Global IR in the IR and Finance Team, Executive Vice President Sunkyoo Han, the Head of Corporate Management Division, General Manager Insub Jung, the Head of Management Support Department in the Management Support Team, Vice President Sangwook Ahn, the Head of Business Administration Division, and Vice President Tangun Lee, the Head of Corporate Management and Support Team. Today's presentation will be delivered in the order of overall business performance in the third quarter of 2026, performance by business group, and key business updates, followed by a Q&A. English interpretation is also provided for this call.
This material contains forward-looking statements, so please be advised that the company's actual performance may differ depending on changes in future market conditions and business strategy. Now, the Head of Global IR, Chanmu Kim, will give a presentation on the earnings of the third quarter of 2026 and key business updates.
Good afternoon. Let me start with our corporate-wide results. In the third quarter of 2026, Samsung C&T reported sales of KRW 12.008 trillion, an operating profit of KRW 1.143 trillion, representing an operating margin of 9.5%. Sales and operating profit increased by KRW 13 billion and KRW 111 billion respectively quarter-on-quarter, driven by solid construction progress on E&C's High-Tech projects. Compared to the same period last year, sales grew by KRW 1.857 trillion and operating profit by KRW 149 billion, extending our solid earnings momentum.
We delivered solid results again in the third quarter, and while some business groups are expected to see lower earnings in the fourth quarter, we expect full-year profitability to improve compared to the previous year. In the third quarter of 2026, we reported a non-operating loss of KRW 114 billion, a financial loss of KRW 35 billion, and equity method gains of KRW 27 billion. Profit before income tax came to KRW 1.021 trillion, and net profit was KRW 801 billion. In the third quarter of 2026, E&C reported sales of KRW 4.465 trillion and operating profit of KRW 277 billion. Sales rose quarter-on-quarter, driven by robust progress on High-Tech projects such as Pyeongtaek P5 Fab 1 and Fab 2, and the ramp-up of new building projects, including the Malaysia Data Center and the Taiwan Kaohsiung mixed-use building project.
Operating margin also improved from 5.1% last quarter to 6.2%, putting us back in the 6% range. In the fourth quarter, we expect High-Tech investment to remain strong and construction on newly secured overseas projects to gain momentum, including the groundbreaking of Taylor Fab 2 in the U.S. alongside the ramp-up of the Malaysia Data Center, the Yongin Duksung Data Center, and the Qatar solar project. Accordingly, we expect both sales and operating profit to grow further quarter-on-quarter. New orders in the third quarter totaled KRW 8.827 trillion. This included KRW 2.8 trillion for U.S. Taylor Fab 2, KRW 2.1 trillion for Daechi Eunma reconstruction, KRW 1.4 trillion for Jamsil Jugong 5 reconstruction, KRW 0.6 trillion for the Pyeongtaek P5 Fab 2 structural frame, KRW 0.4 trillion for Giheung SPR, KRW 0.2 trillion for Pyeongtaek P4 Phase 2, and KRW 0.1 trillion for Bangladesh Dhaka Airport.
Cumulative new orders through the third quarter of 2026 reached KRW 19.275 trillion, bringing our order backlog to KRW 37.746 trillion. Regarding housing construction rights, we secured KRW 2.6 trillion in the third quarter of 2026, including KRW 1.8 trillion for Seongsu 3 redevelopment, KRW 0.5 trillion for Yeouido Mokhwa reconstruction, and KRW 0.3 trillion for Mapo Han River Samsung remodeling. That brings our cumulative total for the year to KRW 6.6 trillion against our full-year target of approximately KRW 11.7 trillion. In the fourth quarter, as we are pursuing additional orders, including a large-scale overseas combined cycle power plant project, we expect to exceed our initial full-year targets. Consequently, we have raised our annual order guidance from KRW 23.5 trillion to KRW 30.1 trillion. In the third quarter of 2026, T&I recorded sales of KRW 4.2 trillion and operating profit of KRW 99 billion.
Earnings declined quarter-on-quarter as favorable conditions in key commodity markets last quarter set a high base, along with a decrease in tariff-free steel volumes following the application of EU steel quotas, weaker conditions in chemical and fertilizer markets, and the deferral of solar PV disposal gains. We expect the fourth quarter to be affected by weaker year-end demand, but we expect earnings to grow year-on-year for the full year. In the solar PV development business, part of the disposal gains was deferred to the fourth quarter, so cumulative gains for the third quarter of 2026 year- to- date remained at approximately $32 million, unchanged from the first half. We expect full year disposal gains to come in somewhat below our initial target of $85 million, as we decided to transition some of our high-quality projects to operations.
In the third quarter of 2026, Fashion reported sales of KRW 498 billion and operating profit of KRW 20 billion. Despite seasonally weak demand and economic uncertainties, both sales and operating profit grew year-on-year, supported by strong sales of popular items from our core brands. In the fourth quarter, we expect sales to grow year-on-year as robust demand for FW items carried over from the late summer heat in the third quarter gains full momentum, and as newly launched brands contribute to sales. In the third quarter of 2026, Leisure reported sales of KRW 181 billion, and operating profit of KRW 22 billion. Sales declined year-on-year due to weaker leisure demand amid the heatwave, and the completion of a large-scale landscape project. Profitability, however, improved year-on-year through operational efficiency. In the fourth quarter, we expect sales to increase year-on-year as the number of large-scale landscape construction sites grows.
However, short-term profitability is expected to decline due to costs such as park infrastructure renewal. In the third quarter of 2026, F&B reported sales of KRW 934 billion, and operating profit of KRW 63 billion. Earnings grew year-on-year, driven by higher meal volumes from newly added sites and higher meal prices. In the fourth quarter, we expect growth to continue on the back of stable food service demand and the full-fledged operation of newly secured sites. We will also strengthen our competitiveness by offering a differentiated customer experience. In the third quarter of 2026, Samsung Biologics reported sales of KRW 1.289 trillion and operating profit of KRW 610 billion, representing an operating margin of 47.4%. Sales continued to grow year-on-year on the back of the smooth ramp-up of Plant 5 and production from the Rockville campus in the U.S. Operating profits declined year-on-year due to ramp-up effects, among other factors.
Samsung Epis Holdings reported sales of KRW 441 billion and operating profit of KRW 52 billion in the third quarter of 2026. Product sales increased, led by the U.S. market, but profitability declined year-on-year due to a decrease in milestone payments. With stable operations at its existing plants and contributions from Plant 5 and the Rockville campus, Samsung Biologics has revised its annual sales growth guidance from the previous range of 15%-20%, to 20%. Epis Holdings expects full-year earnings to exceed the previous years, driven by expanded sales of biosimilar products in the fourth quarter. Now, I would like to go over our key business updates. Despite growing concerns over a deteriorating external business environment, we continue to explore opportunities in promising areas. We are steadily securing new growth engines in E&C's SMRs, NPPs, and data centers, T&I's renewable power generation and operations, and new bio businesses.
Let me go through each of these, starting with SMR. In September, together with GE Vernova Hitachi or GVH, we were selected as the partner for a new 1.2 GW SMR project led by Studsvik, the Swedish nuclear company, and we signed a joint development agreement. The project plans to build four units of GVH's 300 MW BWRX-300. We will participate as a joint EPC partner with GVH, collaborating across all stages from early project development to EPC execution. We will participate across the whole EPC scope, including the full scope of SMR construction, as well as engineering and procurement for the turbine and balance of plants. Also, in September, we decided to invest $70 million in Kairos Power, a U.S.-based Gen4 SMR technology provider, and signed a strategic business agreement.
Through this investment, we aim to differentiate our next-generation SMR engineering and construction capabilities and establish a leading position in the global SMR market. In addition to securing a right of first negotiation on Kairos Power's future commercial SMRs to be built in the U.S., we plan to jointly pursue various SMR opportunities in Korea, Southeast Asia, Europe, and beyond. Next, data centers. In September, we signed an agreement to invest $200 million in Helix Digital Infrastructure, an AI infrastructure company established by U.S.-based KKR. Helix provides end-to-end AI infrastructure solutions, including hyperscale data center development and operations
Power generation, transmission and distribution, and network infrastructure. Leveraging our EPC capabilities, we plan to actively pursue large-scale infrastructure projects in data center construction and power generation. We will first pursue participation in modular data center EPC, and we will also consider expanding our participation across the entire data center value chain, including project development and operations and maintenance. By building relationships with Helix's major partners, we have laid the groundwork to expand our business into the U.S. energy market. Lastly, let me briefly go over our financial structure. At the end of the third quarter of 2026, total assets stood at KRW 140.723 trillion, and total equity at KRW 96.4911 trillion, both down from the end of the previous quarter. Total debt decreased to KRW 2.777 trillion. As a result, the debt-to-equity ratio rose by two percentage points from 44% at the end of the second quarter to 46%.
We maintained a stable financial structure with a current ratio of 149% and a borrowing dependency ratio of 2.0%. This concludes the earnings announcement, and we will now take questions.
[Non-English content]. If you have any questions, please press the asterisk and number one on the phone button. To cancel the question, press the asterisk and number two. For the convenience of proceeding, please do not exceed two questions per time. [Non-English content]. Currently, there are no participants with questions. Please press star one to give your question. [Non-English content]. The first question will be provided by Byung- Hwa Han from Eugene Investment & Securities. Please go ahead with your question.
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I have two questions. The first question is about the GVH project in Sweden. You have said that you have been selected as a partner. I am just wondering about some details about it. It is only marked here as construction planned or scheduled. Can you give us a bit more detail about the structure? For example, is there a buyer for that power already signed on through a PPA for that capacity? Is that how you are expecting there to be commercial operations starting from 2035? I would appreciate it if you could just take us through some of the key milestones of that Sweden GVH project.
Second question is about the data center project that you were talking about, that you were thinking of doing with Helix. With that Helix data center project, in terms of our Samsung C&T revenue, how much would that be in terms of gigawatts?
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To answer your first question about the Swedish SMR project with Studsvik, I can first share the key timelines. We have been selected as the preferred bidder. We are scheduling FEED Phase 1 in 2027, followed by FEED 2 in 2028. Then there will be this feasibility study, and we are scheduling EPC contract signing in 2029, construction of the first unit starting in 2030, completion of that first unit to be in 2035, and of course, it will be followed by completion of other subsequent units. Because the detailed feasibility of the project has not yet been determined, we are not currently able to share detailed contract sizes or revenue.
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To answer your second question about the Helix Data Center project. Regarding that project, we are not at this point able to share detail revenue size, but I think I can give you a bit more background on what we expect to benefit from through that project. As you know, we are focused on becoming a major EPC data center, EPC player in the U.S. Our plan is to complete our modular data center capabilities by 2027, and to expand that in the U.S. That is why we want to participate as an EPC company in that large-scale data center project to be pursued by Helix in Texas. Construction expected from 2028.
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The Helix project is an important stepping stone for us to break into the mainstream energy market in the U.S. Vistra is the number 2 IPP in the U.S. and also a major partner in Helix. Through this network connection with Vistra, we will be able to get a good position into constructing energy projects in the U.S.
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The Helix project has an important meaning in expanding our EPC position in key AI-related sectors, i.e., the data center and power infrastructure.
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The following question will be presented by Soo-hyun Kim from DS Investment and Securities. Please go ahead with your question.
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I have two questions. First question is about the High-Tech. I am wondering what was the share of High-Tech in your Q3 revenue. Also, regarding the P5, it appears that works for Fab 1 and Fab 2 of P5 are undergoing at the same time. When do you think would be the peak of P5? That is, when do you think that will be the transition from structural framework to finishing? Another question is, do you expect your High-Tech revenue to be larger next year than this year? Or do you think this year, 2026, was the peak? Second question is about your order guidance. You have just upgraded, you have increased your full-year order guidance. Back calculating that means that you would need to have around KRW 10 trillion of new orders in Q4 to meet that.
Can you break down that KRW 10 trillion between different sectors of your E&C, for example, High-Tech versus residential and others?
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To answer your first question, High-Tech accounted for roughly 50% of our revenue, and we expect that share to increase as we go forward.
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To answer your second or second part of your first question, our outlook for our High-Tech business in 2027 next year is that orders will continue to remain strong given the continued investment of semiconductors as well as advanced packaging by our customers and the new facility investment in Vietnam by Samsung Electro-Mechanics. So we expect order growth to remain strong next year.
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We are also expecting a good year in terms of revenue. Given that the Pyeongtaek projects as well as the Taylor projects construction will make significant progress next year contributing to revenue. Actually, we are expecting significant upside to our revenue next year compared to 2026.
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About your second question, our guidance, full year guidance on our order size. Yes, we are expecting, we have calculated a pipeline size of KRW 10 trillion for Q4 across different lines of our business. We are actually on track to overachieve our full year guidance.
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To give you a bit more detail in pipeline breakdown by line in terms of construction, the winning bidder for the South West Asia, that is Middle East new airport project is to be announced in Q4. We are waiting for that announcement. Also, the SDS Gumi Data Center project, which was signed in Q3, is expected to increase our contract value, so that will also contribute. We are expecting from that product line about KRW 1 trillion of orders.
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For civil engineering, we are in the final stages of talks about a Southeast Asian bridge project. We are expecting to sign that in November. Including that in Q4, we are expecting about KRW 0.5 trillion or KRW 500 billion in pipeline.
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On the plant side, there are the major gas-fired power plants in Australia. There is also the combined cycle project in Taiwan. There are these major power projects in the pipeline. Also, there is the battery ESS project in the Middle East that we are waiting for results to be announced. Combining all of that from the plant side, we are focusing on winning orders of around KRW 4 trillion.
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On the residential side, we are expecting around stable KRW 3 trillion of orders in Q4, including the Yeouido Sibeom apartment as well as the Gwacheon projects that are moving through the approval process.
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In Q4, High-Tech will continue to contribute as a source of stable growth and a core engine, including the Pyeongtaek P5 projects.
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The following question will be presented by Heewon Choi from Morgan Stanley. Please go ahead with your question.
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I have a question about shareholder return and a possible value-up plan from C&T. Not only C&T, but also other Samsung affiliates are receiving inquiries regarding their value-up plans or any updates to it, given that the AGM season is approaching early next year. I am just wondering, is there anything in addition that you are currently considering in terms of shareholder return other than what you have announced? If you do provide updates, when do you think you will be able to announce an updated shareholder return plan?
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As you know, earlier this year we announced a three-year shareholder return plan covering years 2026 through 2028. Key features of that plan is that we plan to redistribute 60%-70% of dividends that we receive from affiliates, but that the specific amount of dividend per share will be determined by our BOD resolution, considering multiple factors, including our own business performance, cash flow, and changes to tax regulations.
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If, for example, any special dividends paid out by Samsung Electronics for Q3 will also be redistributed according to that already announced shareholder return plan. You have also asked about a value-up plan. We are continuing to study it. We have not yet decided the details or when we will be able to unveil our value-up plan, but we do promise to share it with the market once details have been finalized.
[Non-English content]. The following question will be presented by Steve Chung from CLSA Korea. Please go ahead with your question.
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Thank you for this opportunity. I just have some fact-checking questions. Of the KRW 19.2 trillion in orders, how much was the High-Tech? For the full-year guidance adjusted to KRW 30 trillion, can you also give us how much of that KRW 30 trillion is expected to come from High-Tech?
To give you an update on our High-Tech orders, Q3 High-Tech order was KRW 4.9 trillion. That would be YTD Q3 of KRW 11.2 trillion in High-Tech. This is already KRW 4.4 trillion above our full-year guidance of KRW 6.8 trillion.
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Also, High-Tech is on course to setting a new order record for full year 2026, because in Q4 we have not only the Pyeongtaek P5 projects, but also the Onyang packaging facility and the Giheung memory projects that we are expecting to receive. On this track, according to this course, it is likely that we will be setting a new order high for a full year for High-Tech.
[Non-English content]. Currently, there are no participants with questions. Please press star one to give your question. Currently, there are no participants with questions. We will wait for a second until there is another question.
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The following question will be presented by Heewon Choi from Morgan Stanley. Please go ahead with your question.
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My next question is for the trading side regarding the solar project. It seems that recently you have been able to attract a financial investor as well. Can you give us a bit more detail about the expected timeline covering not only this year but next year?
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As you know, we have been shifting the direction of our solar business from the existing business of selling these project rights after initial development to actually owning and operating it in the long term. Our basic model is to attract financial investors in the early phase, in the development phase, by selling interests, investment stakes to financial investors, joining these financial investors during the development and construction phase, and then attracting additional partners in the operation phase and to operate the facility together. Our current objective is to have around 5 GW of solar capacity in our operation by 2030.
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As you mentioned, last September, we selected IMM Investment as an investing partner in our U.S. solar projects. We are currently continuing to have discussions with IMM Partners regarding the details. Our rough timeline is to have signed the partnership agreement by early next year, complete the sales of our stake, and then to make co-investments into this project to make facilities investments as well as the construction work going on. While that is happening in parallel, we are also identifying potential partners for the operation phase. Our rough timeline for the project is to start construction in 2027, complete construction in 2028, and have the facility operational by 2029.
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The following question will be presented by Kwangpyo Hong from Macquarie Securities. Please go ahead with your question.
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I have a follow-up question regarding that solar project. You have mentioned that C&T is slightly shifting direction of its solar projects from selling the development rights to actually owning and operating these assets. I am wondering how much of capital would be required for you to acquire or hold, own, and operate solar assets at the size that you mentioned is your target. There is a background to why I am asking this question, is because I remember the days back when the trading business had an asset heavy model, for example, investing in acquiring onshore shale assets. But then recently it has turned around to asset light models. Is your swift switch in the solar business direction a sign that the company is thinking of going back to asset heavy model? That actually ties in with market expectations for Samsung C&T's shareholder return.
Yes, the market is expecting you to redistribute what dividends you receive from, for example, Samsung Life or Samsung Electronics. The market is also expecting there to be additional distribution provided from your own free cash flow or changing in capital allocation. That is also in consideration when I am asking this question, because if the company does go back to an asset heavy model, there could be implications to your capital allocation and shareholder return. Once again, the question is, how much capital would be required to create that pool of solar assets that you plan to operate? What kind of financial impact or upside do you expect from that new strategy?
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To answer your question, yes, as you mentioned, there was a time when the trading business had an asset heavy model. A few years ago, we turned around to an asset light model. The project that we have been discussing is our plans to become a solar IPP operator in North America. The reason we came to that decision is because, as you know, we have been developing and selling development rights to solar projects in North America for quite some time. We have realized that we also needed to have presence in the operational phase in order to actually be more competitive in the development phase. Yes, that is why we are extending to operation of solar projects. That said, to dispel any misunderstanding, that does not mean that all the business line within trading and energy will now become asset heavy.
This was a very selective choice on our part. We believe that we could have a competitive edge in solar projects given our track record, and that is why we have decided to extend to operation limited to solar projects in North America. You have also asked about equity and capital requirements. We are not able to give you details at this point, but roughly speaking, 1 GW solar project in the U.S. costs around $1 billion or more. Of course, we are not planning to take on all of that risk on our own. In order to save investment burden on our part, we are looking for financial investors and other partners to join us, not only in the development phase, but also the operational phase.
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Also, the second part of your question was about our capital allocation. The shareholder return policy that we announced earlier this year covers a three-year period, and it included not only the distributions, the dividend policy, but also our investment plans for that three-year period. So in addition to announcing that we will be passing through 60%-70% of dividends received from affiliates, our shareholder return three-year plan also included investments of KRW 8 trillion-KRW 9.4 trillion, which is to be funded mainly from our operational cash flow. Our E&C business is doing well. There is also talks of special dividends being paid out by affiliates. So there are some inquiries as to whether there will be changes to our capital allocation plan.
Given that we have announced our shareholder return policy not yet even a year ago, that it is fairly recently announced, it is a bit too early for us here to talk about or consider changing that already. That said, we constantly examine and monitor our cash flow situation to find the optimal way of allocating our capital.
[Non-English content]. Currently, there are no participants with questions. Please press star one to give your question. Since there are no further questions, we will end the conference call here. Thank you very much.