59th Doosan on Global Track With Original Technologies
By Kim Yoo-chul
Staff Reporter
South Korea's mid-sized conglomerate Doosan Group is increasing capital expenditure on its "two caterpillars," Doosan Heavy Equipment and Doosan Infracore, to help secure original technologies in each core segment for sustainable development.
Such "selection" and "concentration" strategy has recently been boosting the group's corporate image on the global market, company executives and research agencies said.
With a clear corporate vision, the group is set to help its key affiliates diversify their business portfolios and to focus on core territories by applying intensified acquisition schemes.
"Amid increasing signs of economic recovery, Doosan Group is driving drastic mergers and acquisitions (M&A) moves overseas. We will keep consistency toward M&A for further expansion and a better corporate image," Shin Dong-gyu, the chief of the group's public relations team, told The Korea Times.
M&A Lifting Doosan Heavy
According to A.T. Kearney's 2009 Global Champions Report, Doosan Heavy Industries has ranked fourth on the 2009 list of the world's top 40 companies as it has shown both foresight and agility in buying new technologies, while maintaining a consistent corporate culture that emphasizes high performance.
Doosan Heavy expanded from its traditional focus on power plants to include nuclear and desalinization facilities, successfully anticipating the growth potential of both industries.
"At the same time, Doosan integrated vertically through raw materials investments, providing insurance from commodity price swings," the report said.
The U.S. consultancy examined the 2,500 largest listed companies in the world and sorted those that earned a minimum $10 billion in sales in 2008 with at least 25 percent from overseas markets.
It then ranked them based on their sales growth and value creation over the past five years.
"We are aiming to become the leader in the infrastructure support business (ISB). Toward that path, Doosan Heavy is nurturing new markets via steady efforts for technology development in various business segments," a spokesman said.
In line with the corporate strategy, Doosan acquired Czech-based power plant equipment maker Skoda Power.
The acquisition will add to Doosan's capabilities in the core technologies for boilers, turbines and generators ― the three key components of modern power plants ― positioning the company as a leader in the global power plant equipment industry.
"Doosan's new access to proprietary turbine technologies will enable the company to dramatically improve its competitiveness in the power plant equipment business as well as significantly expand business opportunities in these markets," Jeong Dong-ik, an analyst at Hi Investment & Securities, a local brokerage, said.
Jeong said working in partnership with Skoda Power, Doosan aims to grow turbine-related revenue as it sets its sights on the global market, becoming one of the industry's top-tier suppliers.
The deal also makes it possible for Doosan to enter the retrofit and other profitable power plant services markets, enabling the company to compete with global industry leaders across the entire power generation value chain, analysts say.
"The strategic value of the acquisition of Skoda Power is estimated at some 5.3 trillion won in annual sales in 2020. With two axis, Skoda Power and Doosan Bobcock, we will eat up more shares in developed markets such as North America and Europe," Park Ji-won, CEO of Doosan, said, adding he was expecting to get more turbine orders in Europe ― up from the 40-percent level for the time being.
Doosan Heavy is looking to sign a $4 billion coal turbine construction order in Vietnam, which is some 70 to 80 percent of Doosan Heavy's target sale of 6.7 trillion won this year.
The heavy equipment unit is also embracing the rechargeable energy sector including wind-power and fuel cells as other growth engines.
Company officials say the company has been looking to developing eco-friendly technologies including carbon capture and storage (CCS), pre-combustion, oxy-fuel and post-combustion capture (PCC) amid a growing awareness of environment-related issues.
"We will react to the market situation. Although we are not considering striking an M&A deal in the energy-related sector, it might be possible to review our next step to improve in the sector by capturing original technologies," Shin added.
Eco-Tech Positioning Doosan Infracore
While Doosan Heavy is seeking a bigger global share via M&As and overseas partnerships, the group's other key affiliate ― Doosan Infracore ― is in the process of repositioning itself as an eco-focused heavy equipment maker.
For the first time as a local heavy equipment maker, Infracore has been selling energy efficient engines, helping it to get a competitive edge in the environmental-stricken European market, officials say.
"We supplied 320 such engines used in buses in Taiwan, last year. Infracore has been in talks with automakers in Japan, Australia and Singapore to sell the engines," a company spokesman said.
In the North American market, the rising demand for natural gas such as CNG will enrich the company's cash balance.
Early this year, Doosan Infracore America's Engine Division received full Environmental Protection Agency (EPA) and California Air Resources Board (CARB) certification for its natural gas engines.
The North American engine division has been selling its certified engines across the United States over the past few months.
"We are aiming to reap 1.5 trillion won in annual sales by 2013 throughout aggressive promotion for eco-friendly equipment. The sales size seems competitive to better compete with our bigger overseas rivals," the spokesman said.
In China, which Doosan sees as a strategic market, Infracore has recently embarked on plans to join the league of the world's top 10 diesel engine makers by establishing a joint venture with Suzhou Construction Machinery Group.
There, Doosan plans to supply its own machine tools and facilities to be used in the new plant.
"Together with its hydraulic parts and components, it will be able to synergize its resources for the new joint venture ― a key condition to realize economies of a scale in our China business."