[Post IPO] AFW Faces 'Negative Growth' in Earnings Due to Sharp Decline in Sales of Key Products

[Asia Economy Reporter Hyunseok Yoo] AFW is experiencing a decline despite the growth of the secondary battery market. The sharp decrease in sales of its main products is the primary cause. The company plans to overcome this by securing new products and customers.

According to the Financial Supervisory Service's electronic disclosure system on the 27th, AFW recorded sales of 1.5 billion KRW and an operating loss of 700 million KRW in the first quarter. Compared to the same period last year, sales decreased by 61.54%, and operating profit turned into a loss.

This is not the first time the performance has declined. Sales, which were 30.3 billion KRW in 2018, dropped to 26 billion KRW in 2019 and 11.3 billion KRW last year, while operating profit decreased from 10.4 billion KRW to 7.2 billion KRW and then to 500 million KRW.

As a result, factory operating rates have gradually declined. AFW owns the Geumsan factory and the Naksan and Samcheong factories. The Geumsan factory's operating rate varies depending on orders, recording 50.8% in 2019 and 64.15% last year. However, in the first quarter, it dropped significantly to 31.60% compared to 63.90% in the same period last year. Meanwhile, the operating rates of the Naksan and Samcheong factories fell from 61.4% in 2019 to 28.43% last year, and from 52.57% last year to 11.56% in the first quarter this year.

The biggest reason for the slump is the decrease in sales of the main product, the anode friction welding terminal. This product is a component for secondary battery output, connecting the inside and outside of the anode part in the secondary battery cap. AFW's product sales are divided into anode friction welding terminals, friction welding processed products, and others. As of the first quarter, anode friction welding terminals accounted for 79.44% of total sales. Sales of this product decreased from 23.7 billion KRW in 2019 to 9.7 billion KRW last year. In the first quarter, sales were 1.2 billion KRW, down 65.04% from 3.5 billion KRW in the first quarter of last year.

A company official said, "There was a decrease in sales of this product due to design changes in the entire battery by our customers."

AFW currently plans to improve performance by expanding its customer base and supplying new and existing products. The company is preparing CCA and CAF busbars using friction welding technology. Busbars are components that supply electricity from the battery to electrical devices. According to the company, CCA and CAF busbars are lighter and cheaper than conventional copper and nickel busbars. A company representative said, "The busbar projects we are newly pursuing are ongoing. Since friction welding can be applied in various parts along with tapping (demand surveys) by other companies, we plan to continue expanding related businesses."

AFW, established in 1998, is a specialized secondary battery parts company that first mass-produced anode friction welding terminals in 2009. It entered the KOSDAQ market in July 2019. At the time of listing, there was high enthusiasm in the IPO market due to expectations for secondary battery parts companies. The public offering price range was 19,500 to 22,500 KRW, with the final offering price set at the upper limit of 22,500 KRW. Additionally, the general public subscription competition rate was 552.22 to 1, with subscription deposits reaching 4.8725 trillion KRW.