Hyosung Group Mobilizes Resources to Rescue Ailing Hyosung Chemical

Hyosung Group is intensifying its efforts to revive Hyosung Chemical, a company whose stock and bond trading has been halted following significant capital depletion. The group is exploring strategies such as internal restructuring through its affiliates or external sales of key business units to generate liquidity. However, the petrochemical sector's lack of recovery suggests a challenging path to financial stability.

Divestment Plans and Market Focus
Industry insiders revealed on March 30 that Hyosung Chemical is evaluating the sale of its optical film and film business units. The optical film division, a producer of tri-acetyl cellulose (TAC) film, supplies protective layers for polarizers in LCD components across televisions, monitors, laptops, and smartphones. The film division manufactures nylon and polyethylene terephthalate (PET) films, with nylon film utilized in packaging for refrigerated, frozen, and retort food products, and PET film employed in stickers, packaging, and mobile device protection.

Recent Transactions and Financial Impact
On March 28, Hyosung Corp. acquired Hyosung Chemical's Onsan Tank Terminal business for 150 billion won. This terminal handles liquid cargo, ethylene storage, and pipeline rental services, generating approximately 10 billion won in annual EBITDA over the past three years. Hyosung Chemical plans to allocate the entire proceeds to debt repayment, emphasizing the move's role in enhancing financial structure and operational efficiency. The company stated, "The transfer will strengthen our financial position and streamline management," noting that the resulting gains will alleviate debt burdens and improve the debt-to-equity ratio.

Strategic Investments and Divestments
Hyosung TNC injected 920 billion won into Hyosung Chemical last year by acquiring its specialty gas business, a sector critical to the semiconductor industry. Despite the specialty gas unit's growth potential, Hyosung Chemical opted to divest it to escape capital erosion.

Financial Crisis and Delisting Risks
As of the end of last year, Hyosung Chemical reported a total equity deficit of 68 billion won, prompting the suspension of stock and bond trading on March 4. Failure to provide evidence of resolution by March 31 could lead to delisting. However, Hyosung Chemical asserts that the sale of the specialty gas division in January resolved the capital erosion issue, expecting trading to resume soon. Indeed, by the end of January, total equity had rebounded to 359.6 billion won.

Operational Challenges and Turnaround Strategies
Hyosung Chemical is pinning its hopes on its core polypropylene (PP) business for recovery. However, this effort is hindered by the underperformance of its Vietnamese subsidiary, which has absorbed significant investments. Last year, Hyosung Chemical invested 206 billion won in the subsidiary, followed by an additional 27.2 billion won in February and a 577.7 billion won loan. The company incurred losses of 394.6 billion won in 2022, 213.7 billion won in 2023, and 170.4 billion won last year. Hyosung Chemical is considering selling shares in the Vietnamese subsidiary, established to tap into the Southeast Asian market. The company stated, "We are exploring various measures to improve our financial structure," adding, "We are considering selling a portion of the Vietnamese subsidiary's stake, but no definitive decisions have been made."