Samsung Engineering Co Ltd posted a record 1.5 trillion won ($1.3 billion) quarterly operating loss and said it plans a rights issue of about 1.2 trillion won, sending its shares plunging.
Samsung Engineering, the construction arm of the Samsung Group, South Korea's biggest conglomerate, also plans to sell its headquarters which has a book value of 350 billion won.
The losses came from unforeseen costs and risks in Middle Eastern projects including complex gas and oil facilities at the Shaybah oil field in Saudi Arabia, and what the company described as a "lack of preparation and capability" for handling large, complex projects.
Shares in the company slid 15.5 per cent in early trade on Thursday although at one stage they had tumbled as much as 23.7 per cent.
Samsung Engineering had won some project contracts at cut-throat prices over other South Korean construction firms, analysts said, while a drop in oil prices has squeezed investment by oil producers in the Middle East and eaten into construction project margins.
"The company had seen a change in management and went after orders aggressively. But on-the-ground realities were unexpected and market conditions have changed drastically," said Lee Kwang-soo, analyst at Mirae Asset Securities.
Shares in sister firm Samsung SDI, which owns 13.1 per cent of Samsung Engineering, fell 3.8 per cent on Thursday morning.
($1 = 1,138.9900 won)