Sells 90% Stake to Chinese Local Government
Financial Structure Expected to Improve
Dongkuk Steel announced that it has sold a 90% stake in its Chinese subsidiary DKSC (Dongkuk Steel China) to the local government of Jiangyin, China. The restructuring of this low-profitability business is expected to improve Dongkuk Steel's financial structure.
Dongkuk Steel determined that China's domestic market, centered on low-priced commodity products, diverges from the company's business direction of pursuing premiumization with products such as 'Luxteel,' and that securing marketability and profitability going forward would be difficult. Since last year, the company has actively pursued a variety of restructuring measures, including halting sales at its Chinese subsidiary, business diversification, and divestiture, and it recently decided to sell the stake to the Jiangyin local government.
Since its establishment in 2001, DKSC has continuously recorded business losses, with cumulative losses over the past three years totaling approximately 70 billion won on a K-IFRS consolidated basis. Recognizing that DKSC would find it difficult to secure self-sufficiency due to inferior facilities and a lack of capacity to improve profitability, Dongkuk Steel, after roughly a year of negotiations with the buyer, sold a 90% stake in DKSC and Yeonhap Logistics Co., Ltd. at an enterprise value of about 97 billion won.
Through this sale, Dongkuk Steel has achieved an improvement in consolidated earnings and eliminated a 40 billion won debt payment guarantee burden. The company expects that winding down the loss-making business will enhance its external credit rating.
In addition, leveraging its newly secured financial strength, the company is pursuing further expansion into high-profitability markets amid rising demand for high value-added color-coated steel sheets. In line with the 'DK Color Vision 2030' global expansion strategy announced in 2021, the company completed the establishment of two bases in △Vietnam and △Mexico in 2022, and plans to secure additional bases in △Oceania, △the United States, and △Europe by 2030.
DKSC was established in December 2001 as the Chinese local subsidiary of Union Steel, a subsidiary of the Dongkuk Steel Group. It is a base capable of producing 250,000 tons of galvanized steel sheet and 180,000 tons of color-coated steel sheet, and has sold its products in China's domestic market. Yeonhap Logistics Co., Ltd. has operated freight transport, transport-related services, and cargo handling businesses in Jiangyin, China, since 2010.