'U-Tech' Turns Profit... Possibility of Escaping Management Status

[Asia Economy Reporter Hyunseok Yoo] U-Tech, a company listed on KOSDAQ, has succeeded in turning its operating profit positive. This was thanks to restructuring efforts in some business divisions and the strong performance of new businesses. The possibility of escaping from the management watchlist after three years since 2019 is also increasing.

According to the Financial Supervisory Service's electronic disclosure system on the 8th, U-Tech recorded a provisional consolidated operating profit of 2.3 billion KRW last year, turning profitable. During the same period, sales amounted to 36.5 billion KRW, down 15.81% from the previous year. The net loss for the period was 6.7 billion KRW.

Throughout last year, U-Tech reduced operating losses through business division restructuring. In addition, achievements in new business sectors led to the turnaround to profitability. The management normalization efforts initiated by replacing the management team in June last year yielded results. Since the inauguration of the new CEO, Lee Jung-tae, the company focused on restructuring the existing loss-making businesses and generating profits through business diversification.

U-Tech first liquidated the Eco Energy business division, which had shown growth limitations due to intensified competition within the industry. Turning its attention to the healthcare sector as a new core business, U-Tech engaged in mask manufacturing and distribution, as well as virus elimination preventive product development, starting from the early stages of the COVID-19 pandemic.

The main driver of the turnaround to profitability was the imported luxury goods distribution business, which showed results from the second half of last year. The direct import and distribution business of imported luxury brands such as Gucci, Prada, Balenciaga, and Bottega Veneta, which was promoted from early last year, smoothly landed and led to improved fourth-quarter performance, supported by the boom in the F/W season and the expansion of the online market.

Along with this, it is expected that U-Tech will be able to escape from the management watchlist designation, which was imposed in 2019. U-Tech was included in the watchlist due to operating losses continuing over four fiscal years. The company expects a quick exit as the reasons for the watchlist designation have been resolved. Last year’s turnaround to profitability and the conversion of convertible bonds reduced the debt scale and improved the financial structure by raising the capital scale to around 32.5 billion KRW.

A U-Tech official said, "With last year's turnaround to profitability, we completely resolved concerns related to operating profit and laid the foundation for management normalization," adding, "The reason for the net loss was due to the aggressive and proactive large-scale reflection of one-time expenses such as provisions in the financial statements last year."

He continued, "Thanks to continuous efforts to improve the financial structure last year, most debts have been eliminated, and we hold sufficient cash internally, providing ample investment capacity for new businesses," emphasizing, "This year, when new businesses such as preventive therapeutics are fully underway, will be the first year in which both operating profit and net profit turn positive."