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A worker at KOMSCO's Gyeongsan plant last week checks into the printed volumes of the Peruvian currency KOMSCO will deliver by the end of June. / Korea Times photos by Choi Kyong-ae |
By Choi Kyong-ae
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| KOMSCO CEO Kim Hwa-dong |
Korea Minting, Security Printing & ID Card Operating Corp. (KOMSCO) "will put a greater focus on exploring new clients outside the country as the local demand for bank notes and coins has been dwindling due to an increased use of credit cards and growing appetite for online shopping," KOMSCO Chief Executive Kim Hwa-dong said last week.
He made the remarks at a press event held on Thursday in Gyeongsan, 331 kilometers southeast of Seoul, to give local media reporters a chance to look around KOMSCO's production facilities.
"The output volume of bank notes has fallen by nearly half compared to five years earlier. The introduction of the 50,000-won ($49) bank note five years ago also resulted in lower volumes of bank notes," the CEO said.
In 2009, the Bank of Korea (BOK) decided to add the 50,000-won note to its product lineup to meet an increasing demand for high-value notes amid a growing economy, showed KOMSCO data.
From 2009 to 2013, KOMSCO produced about 900 million 50,000-won notes valued at combined 45 trillion won ($44.2 billion). It accounted for a whopping 88 percent of the overall bank notes worth 51.13 trillion won printed during those five years, according to the data.
Still, less than 30 percent of all the printed notes has been retrieved in the past five years, fueling speculation that many 50,000-won notes are not in circulation but in private coffers.
As they prefer cash and cash equivalents to avoid taxes and for other illegal evasions, wealthy holders often stash cash away.
In contrast, the volume of 1,000-won notes fell sharply to 250 million from 490 million during the same period. This means customers increasingly prefer carrying large bills to small ones.
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| In the photo above right, the 10 won coins are being produced at KOMSCO's production lines at Gyeongsan, 331 kilometers southeast of Seoul. |
One of KOMSCO's major income sources were cashier's checks years ago. But the emergence of the high-value note has changed the landscape significantly when it comes to the use of bills and coins.
As a result, KOMSCO's full-year net profits plunged to 479 million won ($473,000) in 2012 from 3.2 billion won a year earlier. Net profits recovered to 3.38 billion won in 2013, though, said the company.
Operating profits also fell to 228 million won in 2012 from 7.17 billion won a year earlier. This rebounded to 2.94 billion won last year when sales were 427.06 billion won. The company aims to achieve 440 billion won in sales this year.
Diversification for growth
Currently, KOMSCO earns 50 to 60 percent of its total sales by producing bills and coins at the BOK's request. It makes 10 percent from overseas sales, with the remainder coming from order productions of gift certificates, medals, gold bars and stamps and bonds.
The 1,500-member company badly feels the need to develop a balanced business portfolio for long-term growth. That's because orders from the central bank only fill up to 60 percent of its overall output capacity at the Gyeongan plant.
Thus, "We will increase the ratio of overseas sales and exports to 15 percent in the next three years," Kim said. "To that end, we are stepping up efforts to receive more orders to produce currencies for the countries that do not have technologies to make their own bills and coins."
As most order production deals are one-year contracts, KOMSCO is focusing on extending existing deals.
In the most recent achievement, KOMSCO won a 9.7-billion-won order in June from Peru last year to produce 305 million 50 nuevo soles. A 50 nuevo sol is worth about 18,200 won. The delivery will be completed by the end of June, Kim said.
Other countries such as Peru don't have their own currency minting facility. So KOMSCO is considering expansion into other Latin American countries which do not run its own currency printing plant, either, the CEO said.
"We are in talks with several Latin American countries to bag orders to produce their notes or coins," he said without elaborating on the talks.
Helped by escalated efforts to win orders, KOMSCO expects to achieve $50.3 million in exports for the 12 months ending on June 30 this year. The state-run company produces coins and notes for overseas clients and exports cotton papers, pigment and ink used to make bank notes.
The value of order production and exports continued to rise to 42.95 billion won in 2013 from 13.07 billion won in 2011. In the January-May period this year, the value reached 26.56 billion won on increased exports, KOMSCO said.
Countries for which KOMSCO has produced or is producing currencies include Japan, Switzerland, Vietnam, Thailand, Peru and Indonesia.
In other efforts to find a breakthrough, the company takes aim at earning orders to make National Identification Cards and electronic passports in a packaged product.
"The fact that all Koreans have their own National Identification Number is unique to Korean culture. If there are countries which want to adopt this system, we will be able to export the operating systems as well," Kim said.
Meanwhile, KOMSCO has begun to sell the "ORODT" gold bar which weighs from 37.5 grams to 0.5 kilograms with 99.99 percent purity on June 2 through KDB Daewoo Securities. One-kilogram gold bar sells at 53 million won as of Tuesday.
The approach is to make a presence in the Korean gold bar market. The official trading volume of gold bars and other gold products reaches 100 tons to 110 tons worth 5 trillion won as of June.
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