Discord Spreading in 'Choesin Mulsan' Acquired by Baeksan

[Asia Economy Reporter Yoo Hyun-seok] Choesin Moolsan, acquired by Baeksan, has experienced a deterioration in performance just over a year after the acquisition. This was due to large-scale losses caused by inventory assets and poor performance of overseas affiliates. Recently, discord has arisen as critical posts about the current CEO's actions have appeared on the internet within Choesin Moolsan.

According to the industry on the 10th, on the 4th, a post titled "Regarding the Current Situation of Choesin Moolsan" was uploaded on the anonymous workplace bulletin board app 'Blind.' The post claimed that the current management lacks business capability and is using employees for their personal businesses.

The author of the post stated, "If you came to Choesin as CEO, you should have let the decades-old well-performing business continue smoothly and focused on new businesses, but instead, you completely destroyed what was running well," and added, "There are no results from the new business, and with the Japanese side, they put on a show that deceived everyone's eyes by wrapping it up with ambiguous words."

He continued, "Meanwhile, unethically running his own business while making Maruko work," and said, "If the CEO and the puppets he brought along overseas all step down, we could restore normal management again, right?"

Choesin Moolsan was established in 1974 and sells fashion and functional material clothing products. In 2018, Baeksan acquired it for 51 billion KRW and holds 95.23% of the shares. Currently, Choesin Moolsan operates under a co-CEO system. After being acquired by Baeksan in 2018, Choi Jeong-ho and Hyun Sang-yeop took on the new CEO roles. Hyun Sang-yeop is known to be in charge of sales, while Choi Jeong-ho manages finance.

Before being acquired by Baeksan, Choesin Moolsan consistently posted solid results. In 2015, it recorded sales of 148.6 billion KRW and operating profit of 5.9 billion KRW. In 2016 and 2017, sales were 138.5 billion KRW and 149.6 billion KRW, with operating profits of 5.4 billion KRW and 4.1 billion KRW, respectively. However, performance began to deteriorate after the acquisition. In 2018, the first year after acquisition, sales increased to 162.7 billion KRW compared to the previous year, but operating profit sharply dropped to 274 million KRW. Particularly, last year, sales reached 171.3 billion KRW, but operating loss was 1.4 billion KRW. It was the first time since 2010 that Choesin Moolsan recorded a loss.

Regarding cost of sales, inventory assets, which were profitable in 2018, turned into a loss of 1.6 billion KRW last year. As a result, although sales increased compared to the previous year, gross profit decreased to 21.5 billion KRW from 21.8 billion KRW the year before.

Additionally, equity method valuation losses increased from 1.7 billion KRW in 2018 to 7 billion KRW in 2019. This is interpreted as all seven overseas affiliates held by Choesin Moolsan recording net losses for the period. Among the overseas affiliates held by Choesin Moolsan, CHOI&SHIN'S VINA LTD. recorded sales of 9 billion KRW and a net loss of 3.2 billion KRW, while PT. CREVIS TEX JAYA had sales of 8.4 billion KRW and a net loss of 2 billion KRW. Some of these are also in a state of capital erosion.

This has also affected Baeksan's performance. Based on consolidated financial statements, last year Baeksan recorded sales of 468.8 billion KRW and operating profit of 32 billion KRW. Kim Doo-hyun, a researcher at Hana Financial Investment, explained, "The deterioration in Baeksan's consolidated performance is due to Choesin Moolsan's operating loss and one-time expenses," adding, "Choesin Moolsan incurred significant losses due to operating losses caused by reduced operating rates in the off-season of the fourth quarter, as well as one-time expenses such as inventory asset impairment provisions and customer claim costs."