By Kim Yoo-chul
Kumho Petrochemical is gearing up for a major expansion.
“We hope to be free from creditor supervision by the end of this year or even sooner with an overseas acquisition deal next year,” said Chairman Park Chan-koo in an interview.
Creditor supervision is an agreement by a firm to improve its financial status under the watch of creditors and can be thought of as a milder form of debt workout.
This means Park will be free to expand, ending two years of bank interference, following trouble with Daewoo Engineering and Construction and logistics firm Korea Express, which were acquired by Honorary Group Chairman Park Sam-koo.
The Kumho Petrochemical chief is Park Sam-koo’s younger brother. The two Parks fought for control of the group starting in June 2009, but now their split is coming close to a reality.
Last year, Kumho Petrochemical reported 5.3 trillion won in revenue and 620 billion won in operating profit — both are records — after it swung into profit in 2010 with an annual operating profit of 360 billion won and net profit of 470 billion won, according to data from the Korea Exchange (KRX).
“Kumho-Asiana Honorary Chairman Park Sam-koo insisted on taking over Daewoo Construction and Korea Express,” said the Kumho Petrochemical chairman.
He said that his elder brother dragged his feet in selling Korea Express to ease cash flow problems in 2008 because its acquisition was conducted by Sam-koo’s son.
“If it was sold, it would have raised questions about the nephew’s management ability and thwarted his father-to-son succession attempt,” he said.
However, he conditionally ruled out the possibility that he will hold on to 13.43 percent or some 14 million shares in Asiana Airlines in order to block a two-way split between him and his elder brother.
“There are two conditions — the rising share price of Asiana Airlines and the promise by Sam-koo not to interfere in my key businesses,” he said without elaborating.
The Korea Development Bank (KDB), the main creditor of Kumho Petrochemical, is asking Park Chan-koo to sell his stake in Asiana.
The share price of Asiana has been sluggish recently and the sale of the stake will cause Kumho Petrochemical to incur a loss, market analysts say, adding Sam-koo’s plan makes sense.
Now, Chan-koo’s plan is clear — helping Kumho Petrochemical post external growth by striking major acquisition deals.
“Kumho Petrochemical is seeking M&A deals overseas to strengthen our traditionally-strong businesses. Targets will be in Asia,” he said.
The profit margin for Kumho Petrochemical rose to 11.8 percent from 9.3 percent a year ago, while the debt ratio was reduced to 236.4 percent from 379 percent during the same period, according to separate data from the KRX.
“Kumho Petrochemical is aiming to invest 500 billion won in additional output of chemical products this year, which will be another record in terms of profit and revenue,” Chan-koo added.
The company is the world’s largest producer of synthetic rubber in terms of output and aims to achieve sales of 20 trillion won by 2020 as its long-term target. “I will buy more company shares,” said Park.
Park has so far spent some 8 billion won to buy over 50,000 shares with the aim of maintaining his management rights to run the petrochemical company.
KDB is holding a 14.41 percent of Kumho Petrochemical, followed by Park’s eldest son Park Jun-kyung with 7.17 percent and Chan-koo with 6.52 percent.
Chan-Koo had been under investigation since early last year by top local prosecutors over allegations that he had created a slush fund. An arrest warrant was denied.
“It’s too early to mend the souring ties with Sam-koo and honestly, we’ve crossed critical lines,” he said.