By Kim Yoo-chul
CJ Group, Korea’s 20th largest conglomerate, has adopted an emergency strategy as a steep decline in profits of its key affiliates is directly hitting the company’s bottom line, CJ officials said Sunday.
Chairman Lee Jay-hyun is considering closing some of its money-losing businesses while focusing on core and lucrative areas to enhance profitability. The money that will be saved from the cost-cutting efforts will be used to find new cash-cows and to expand its overseas businesses.
“All of our affiliates went into emergency management mode since early this month. We’ve told employees to start work about an hour early,” said a group official.
“That’s part of efforts to boost competitiveness amid market uncertainty. CEOs of the group affiliates agreed to draw up survival plans.”
The group is tightening its belt. It asked executives to reduce expenditures using corporate credit cards. Only sales personnel are allowed to use cards to treat clients and business partners after regular working hours.
“If one division spends beyond the budget limit, then the head of that division will be held responsible,” said the official.
The move came as the group’s key cash-generator _ CJ Cheil Jedang _ is suffering from a sharp decline in margins.
Other affiliates have also performed poorly in recent months amid slow local demand and economic uncertainty.
During the first three months of this year, Cheil Jedang’s profit dropped by almost 12 percent from a year earlier.
The combined profit of Cheil Jedang and the group’s logistics unit CJ Korea Express fell 21 percent year-on-year during the same period.
“We need to make efforts to turn the ongoing difficulties into a chance to make the company more profitable,” Cheil Jedang CEO Kim Chul-ha said in a message to employees.
CJ E&M, the entertainment affiliate which owns various cable TV channels, is also considering restructuring.
Lee said earlier that this year will be crucial for the group’s global expansion.
By 2020, CJ aims to generate 100 trillion won in sales, 70 percent of which it expects will come from outside Korea. It also aims to grow at least two of its core affiliates into global leaders in their respective fields.
CJ was separated from Samsung Group in 1993. Samsung Electronics Chairman Lee Kun-hee is the younger brother of Lee Maeng-hee, the former president of CJ.