[Asia Economy Reporter Ki-min Lee] Doosan Solus and Doosan Fuel Cell, considered key affiliates of Doosan Group, are expected to see increased performance this year as well. Although investment sentiment has frozen due to the impact of the novel coronavirus disease (COVID-19), causing immediate difficulties in sales, there is some expectation that these affiliates could be sold at their true value.
According to Doosan Solus and Doosan Fuel Cell on the 8th, both companies recently announced their first-quarter results for this year. Doosan Solus recorded consolidated sales of 70.9 billion KRW and operating profit of 8.9 billion KRW in the first quarter of this year. This represents a 17% increase in sales and an 11% increase in operating profit compared to the same period last year. Doosan Solus explained that the increase in first-quarter performance was driven by higher sales of high-end copper foil due to the expansion of the 5G market, increased application in mobile devices, and increased OLED sales from the development of TV products.
Doosan Solus expects copper foil sales to continue steadily in the second quarter of this year as digital equipment and data usage surged due to the spread of COVID-19. To meet the demand for high-end copper foil, Doosan Solus is currently expanding its circuit foil facility in Luxembourg (CFL) by 3,000 tons. Accordingly, Doosan Solus forecasts its sales target for this year to increase by 27% from last year to 334 billion KRW. Operating profit is also expected to reach 42 billion KRW, a 10% increase from last year.
Doosan Fuel Cell, engaged in the fuel cell business, recorded consolidated sales of 20.1 billion KRW and an operating loss of 4.6 billion KRW in the first quarter of this year. Sales decreased by 36.4% compared to the same period last year, and the operating loss increased by 3.2 billion KRW. Doosan Fuel Cell explained that the decline in first-quarter performance was due to the impact of the delivery schedule to customers, resulting in decreased sales and operating profit compared to the previous quarter.
However, Doosan Fuel Cell announced that its performance will improve significantly in the second quarter of this year. Doosan Fuel Cell stated, “We expect an additional order of 20MW in April alone from our core fuel cell business,” and “We will achieve new orders of 60MW by the end of April.” This corresponds to 42% of Doosan Fuel Cell’s annual order target. Doosan Fuel Cell further expressed confidence by stating, “We expect to achieve 142MW by the end of this year, with sales of 452.3 billion KRW and operating profit of 25 billion KRW.” The company anticipates that the domestic fuel cell market (based on orders) will grow 1.6 times from 184MW in 2019 to 300MW in 2023.
Some in the industry predict that since Doosan Solus and Doosan Fuel Cell have achieved stable performance despite the impact of COVID-19, Doosan may be able to sell these affiliates at their true value. Doosan plans to raise more than 3 trillion KRW as part of its self-rescue plan. Accordingly, it is known that Doosan will sell core business units such as industrial vehicles and the electronics BG. In particular, Doosan Solus and Doosan Fuel Cell, which operate businesses with future value, have been put on the market for sale.
Regarding the sale of Doosan Solus shares, negotiations with the private equity fund SkyLake Investment have broken down. At the time of the failed sale, the business value of these affiliates was considered sufficient, but there was speculation in the financial investment industry that the sale price could fall because companies are reluctant to invest due to COVID-19. Doosan believes that considering the profitability and future value of Doosan Solus’s business, it should receive more than 800 billion KRW from the sale of a 61% stake and management rights. As of the 8th, Doosan Solus’s market capitalization is 1.0049 trillion KRW. Doosan Fuel Cell and related parties, including Doosan and its controlling family, hold about 61% of the shares. Doosan Fuel Cell’s market capitalization is 420.1 billion KRW. The industry expects that if Doosan sells its stake in Doosan Fuel Cell, it will fetch about 250 to 300 billion KRW.
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