Kumagai Gumi Shares Plunge on Plans to Rebuild Apartment Complex

  • Shares have the biggest intraday decline since November 2002
  • Yokohama apartment buildings were sold by Sumitomo Realty

Shares of Kumagai Gumi Co. had the biggest intraday decline in more than 13 years after the Japanese company said it is considering rebuilding five apartment buildings that were found to have problems with reinforcing steel.

Shares fell as much as 25 percent and were trading 18 percent down at 243 yen, the lowest since May 2014, at the 11:30 a.m break in Tokyo.

Kumagai Gumi is the construction company for the residential complex built in 2003 in Yokohama that was sold by Sumitomo Realty Co. Reinforcing steel in some locations at the complex were found to be severed. Kumagai Gumi originally said it will rebuild one of the buildings and repair the rest, but the company has started to consider rebuilding the entire complex, it said in a statement Monday.

The incident is reminiscent of another residential complex with building flaws in the same city sold by Mitsui Fudosan Co., which prompted an investigation that found more buildings with falsified data. Shares of subcontractors that were involved in the construction of that complex, including Asahi Kasei Corp. and Sumitomo Mitsui Construction Co., fell after the case came to light.

Tokyo-based Kumagai Gumi said it is reviewing the potential for additional losses after booking contingency reserves of 8.1 billion yen ($71.4 million) last year, the company said in the statement Monday. The company said it doesn’t expect the incident to have a major impact on its forecast for this fiscal year.

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