[CEO Report] Daesung Industrial Co., Ltd focus on energy business … “This year, the turn-around will be in full swing.”

Finalizing the eight-year restructuring… “From this year, we will expand our investment in new business.”

 

“We have been paying back our principal and interest to our creditors during the last eight years of restructuring without a month’s delay. From now on, it’s time to focus on our own business and make a fresh leap.”

 

“The restructuring that has been going on for about eight years is almost complete.” Gwan Ji, who is the CEO of Daesung Industrial, was interviewed by MTN at its headquarters in Guro-gu, Seoul. “We are focusing on strengthening our new business and exports, and we are going to have a full-fledged turn-around starting this year.”

 

◇Improve debt ratio to 110% through strong restructuring

 

Daesung Industrial started its business of briquette industry in 1947 in Daegu and has been growing mainly in oil and gas sales for more than 70 years. In the form of a holding company, the company operates various energy-related businesses through own subsidiaries. The oil and gas business accounts for 87 percent of all sales. It is currently GS Caltex’s largest general agent, setting up and running 39 gas stations and 21 gas charging stations across the country.

 

Its major affiliates include Daesung Celtic Enersys, which manufactures and sells home boilers, Korea Cambridge Filter, which manufactures domestic industrial filter, Daesung C&S, an industrial detergent producer, Daesung Measuring, the manufacturer of gas meters, Daesung Heatpump, and DS Power, which supplies heating and cooling in the region.

 

The company has undergone harsh restructuring for the past eight years. The reason behind it is that it started developing a large residential complex called D-Cube City in 2007. At that time, the sluggish construction industry caused project financing to be prolonged, resulting in a large displacement and excessive borrowing for PF operations. The amount of debt increased to 2.5 trillion won at the time.

 

Since 2011, the company has been engaged in intensive restructuring, including selling assets such as the D-Cube Complex Shopping Center (549 billion won), Daesung Industrial Gas Stock (555.7 billion won), and Yongin Gugal Land (348.8 billion won) and including mergers with its parent company. As a result, the debt-to-equity ratio, which reached 2,000 percent at the time, has improved to the 110 percent level at present, and the size of borrowing has also dropped from 2.27 trillion won in 2011 to 220 billion won as of the end of last year.

 

It achieved its first surplus in eight years last year through hard restructuring. Its consolidated-based sales rose 5 percent on-year to 945.5 billion won last year, with operating profits hitting 6.1 billion won on reduced restructuring-related costs. It is predicted that profits will improve significantly again this year.

 

“We will drastically reduce the construction and distribution business sector, which used to be a huge burden, and focus on our original business, energy-related business.” Said CEO Gwan Ji. “We will continue to sell assets and land that are unprofitable or low-returnable in the future and reduce the debt ratio.”

 

◇The first year of each affiliate’s overseas expansion… “Strengthened New Investment”

 

The company will strengthen new investments in its oil business sector, which is its main sector in the future. Its goal is to achieve 1 trillion won in sales by boosting profitability by expanding rental and composite oil station. “We are looking for a new business model through the combined development of gas station sites in Seoul and the introduction of a ‘complex gas station’ linked to fast food restaurants on idle sites at the gas station” said CEO Gwan Ji.

 

In particular, the company believes this year as the first year of its overseas expansion. It plans to expand its overseas market, accelerate its inroads into the region and produce results from each affiliate.

 

Daesung Celtic Enersys recently set up a U.S. corporation and a local plant in China, and plans to set up a Russian firm this year to bolster exports of boilers. Daesung C&S, which makes an industrial detergent, is also preparing to establish a Chinese corporation. Daesung Measuring, which manufactures gas meters, is currently building an assembly plant in Brazil and is planning to target Latin America in the future.

 

Another growth momentum is the parcel classification business. The company recently set up parcel classification automation equipment at the Central Area Post and Logistics Center of the Korea Post in Daejeon in cooperation with Siemens. It is planning to finish the process with equipment that allows automatic classification of about 80,000 mailings per hour by size and destination and operate them within first half of this year.

 

Through this, it expects to produce tangible results within this year. “We have three layers of conveyor belts and have 3 times more processing capacity than current systems even in narrow areas” said CEO Gwan Ji. “We have secured competitive edge in Asia as the first case of establishing an advanced logistics classification system through differentiated engineering techniques.”

 

The company aims to move from simple manufacturing to manufacturing engineering service company in the future. “Daesung Industrial has grown along with the urbanization process that meets the social needs of the Republic of Korea, such as briquettes, urban gas supply, gas boilers and collective energy” he said. “Since we have passed the long tunnel, we will make a new leap with our operational know-how.”

 

<Copyright © Money Today Network MTN = Sooyeon Park (tout@mtn.co.kr)>

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