Cash flow not a problem, Park claims
Doosan Group Chairman
By Kim Yoo-chul
New Doosan Group Chairman Park Yong-maan vowed to be aggressive in pouncing on merger and acquisition (M&A) opportunities as he looks to open a new chapter for the country’s oldest business group among top conglomerates.
Granted, the big moves won’t come this year as the group will first attempt to rearrange its current business lineup to improve synergy and reduce overlaps. But Park stressed that the efforts to improve direction and efficiency at home will provide an important foundation when it begins to expand.
Park, who recently replaced Park Yong-hyun at the management helm, said the fruits from Doosan’s rebuilding efforts will be visible soon.
``The group’s key businesses are on the right and stable track. We are enjoying higher shares in our critically-important markets. We will only get better,’’ Park told reporters at a press conference in Seoul.
Doosan Heavy, one of the group’s key business units, completed the acquisition of Indian equipment manufacturer, Chennai Works, previously owned by Austria’s AE&E. Doosan says the deal will provide a platform for the company to advance to the Indian market for power equipment.
Spirits are high as Doosan E&C and Doosan Infracore as well. Doosan E&C expects to reap 2.5 trillion won in revenue and 140 billion won in operating profit this year, which would qualify as an impressive rebound from a 2011 drenched in red ink.
Doosan Infracore, a leading construction equipment maker, said its project to build a manufacturing plant for excavators in Brazil is going smoothly. The company may open the plant ahead of schedule, sources say, although the company remains coy.
Founded in 1896, Doosan had been known mostly as a leading maker of beer, wine and other beverages for the most part of its history. However, the group has successfully transformed as a power in business-to-business (B2B) sectors in the past two decades.
Park, who is fluent in English, said that group’s B2B units will continue to be the core of its business.
Doosan’s revenue-creating businesses are mostly related to construction and power-related fields such as heavy equipment, power plants, desalinations facilities and construction.
``The group went through big changes over the years. Over 50 percent out of the group’s entire employees are non-Koreans. Most of workforces joined our team after 2000, which means we are active, young and global. At Doosan, a person’s age, sex, color of skin and nationally don’t matter, but just his or her ability,’’ said Park.
Tightening financial screws
Park has stressed that financial soundness of the group’s main affiliates are improving. One of the key factors that could strengthen his confidence is the improvement of Bobcat, a U.S. construction equipment maker it snatched up in the M&A market.
``Bobcat will reap over 200 billion won operating profit by the end of this year. Bobcat is stabilizing,’’ Park told reporters.
Doosan Infracore had bought Bobcat for $4.9 billion won in 2007, which went down as one of the biggest M&A deals ever in the Korean industry.
Acquiring Bobcat was mainly Park’s idea, but he received criticism due to Bobcat’s financial troubles that had many questioning whether Doosan committed to the wrong deal.
The demand for Bobcat’s heavy equipment had declined in recent years due to a worsening global economy. Park was unfazed. He has been directly involved in 42 M&A deals executed by Doosan since the late-2000s.
``I’m not too much worrying about the talks of financial problems at our affiliate. The loss at Doosan E&C was due to the ongoing housing slump, but we since have been succesfuly in our attempts to diversify our revenue sources,’’ Park said.
Doosan’s profits are heavily dependent upon economic activity. Park expects the global conditions to improve in the coming months and that would be a boon for Doosan’s main affiliates.
``Three major risks, elections, the eurozone debt crisis, and high oil prices, appear controllable. This year, however, the recovery will be milder than the rebound expected for next year. The U.S. economy is improving and the risks facing the Chinese economy are easing too,’’ he said.
Asked when he will make the move for M&A, Park described himself as a "crouching tiger."
``This is not the right time to make a big deal. But the time will come,’’ Park said.
As a group, Doosan expects to reap 29.1 trillion won (about $26 billion) in revenue this year, which would represent an annual 11 percent increase. The forecast for operating profit is 2.2 trillion won, up 29 percent from last year.
Doosan has opened a possibility to appear its face again to the global M&A markets, according to the chairman.
As a part of his initiatives to boost Doosan’s brand awareness, Park plans to become an official sponsor for ``The Open Championship’’ golf tournament this year as well. Doosan was the main sponsor for the event from two years ago.
``Yes, we will sponsor for the game this year. By sponsoring the event, Doosan’s main clients can communicate and we’ve seen much benefits,’’ he said.
Doosan rented a cruiseship with total rooms of 150 to service its customers who participated the last year’s event and that represent Doosan’s full hospitality for customers, according to Park. Doosan was one of six patrons including Rolex and Lexus last year and it was the first Korean company to join The Open.
Doosan is well represented in Europe and the Americas through its growing power plant business, Doosan Power Systems, with headquarters in the UK.
``Joining The Open as a patron is an excellent opportunity for Doosan to raise its profile throughout the world, and we believe the outcome will definitely surpass our expectations,’’ he said.
But the chairman declined to unveil much details of the group-wide ongoing projects to find its ``next earnings revenue’’ and just added ``we will see what happens.’’