While most companies in the same industry are struggling with declining business performances, a few companies are bucking the trend.
In the Korean petrochemical industry, that is the case with Kumho Petrochemical.
The company’s good business performance is owed to Kumho Petrochemical’s focus on its sole mainstay, synthetic rubber in return for dramatically disposing of business segments whose profit dropped.
A public document submitted to the Financial Supervisory Service on April 8 showed that Kumho Petrochemical posted 7,155 billion won in sales and 272.8 billion won in operating profit last year.
Kumho Petrochemical saw the size of the profit decline from the previous year, but the company maintained an operating profit for three years in row.
External credit ratings of Kumho Petrochemical are rated favorably.
The company’s credit rating was rated at “A+” and its outlook stood at “positive.”
The company strikes a contrast with Lotte Chemical, which saw its credit rating rated at “AA+” and Lotte Chemical, which saw its credit rating rated at “AA.”
Morgan Stanley Capital International revised upward to “BBB” Kumho Chemical’s ESG evaluation on Feb. 18.
Petrochemical companies belong to the same industry, but Kumho Petrochemical is in a downstream segment, different from other petrochemical companies.
Petrochemical companies produce base oils, such as ethylene and propylene by cracking naphtha in the course of refining crude oil — the upstream segment.
Companies like Kumho Petrochemical belong to the downstream segment — producing polyethylene and polypropylene and refined chemical products, such as synthetic rubber through decomposing of base oils.
Upstream companies, such as LG Chemical, Lotte Chemical and Hanwha Solutions, had been scrambling to expand NCC facilities when the petrochemical industry was booming.
At that time, they posted good business performances. But now they are grappling with a supply glut, caused by Chinese companies.
On the other hand, Kumho Petrochemical has been focusing on a value-added product portfolio rather than its competitors which had competed in expanding NCC facilities.
Kumho Petrochemical saw synthetic rubber, its mainstay product, chalk up 100.8 billion won in operating profit last year.
It was in 1973 that Kumho Petrochemical began to produce synthetic rubber.
The company ranks 1st in the synthetic rubber material segment of nitrile butadiene latex, a raw material for producing medical and industrial globes.
Kim Do-hyun, a researcher with SK Securities, said, “The popularity of sports utility vehicles has boosted the demand of large-sized tires, made with synthetic rubber, and the arrival of the time of replacing EV tires played a part favorably.”
A view of tires, made with eco-friendly synthetic rubber produced by Kumho Petrochemical.
Kumho Petrochemical is expected to benefit from the United States’s impending imposing tariffs on Chinese-made nitrile butadiene latex is expected to bring, so the company is predicted to see 2025 Q1 operating profit in the synthetic rubber business jump 240 percent compared to the previous quarter, Kim said.
Kumho Petrochemical Chmn. Park Chan-koo has intensified the “choice and concentration” strategy since 2015, when the company was spun from Kumho Asiana Group.
In 2020, Kumho Petrochemical disposed of the semiconductor material, photoresist business to SK Materials.
Instead, the company has been concentrating on replacing the synthetic rubber production line into eco-friendly, value-added equipment, raising the portion of the latter to some 60 percent.
A Kumho Petrochemical official said the company has been concentrating its capabilities on nurturing three new growth engines — EV solutions, eco-friendly bio and value-added specialty products.
Kumho Petrochemical Announces Plan to Return 40 Percent of Net Profit to Shareholders
Kumho Petrochemical announced a plan to raise its corporate values, including new shareholder return policies and future growth strategies on Feb. 11.
The company suggested proposals to raise the shareholder return rate to up to 40 percent in the next three years, the sales growth rate to 6 percent by 2040 and the return on equity (ROE) to 10 percent by 2030.
Kumho Petrochemical plans to raise the own share purchase and disposal rate from 5 percent to 10 percent of its net profit, which was announced in 2021, to 10 percent to 15 percent starting this year.
The company plans to maintain the dividend payout ratio to 20 percent to 15 percent. Up to 40 percent of its net profit will be used under shareholder return policies.
