[Funding] Dongil Steel, Investment in Aluminum Thin Rod Expansion

Responding to Increased Demand for Aluminum Thin-Walled Tubes, Lightweight Automotive Material
Monthly Production Expanded from 1100t to 1900t... Expected Sales Growth

[Asia Economy Reporter Park Hyungsoo] Dongil Steel, which produces PC wire rods, Ma Bong wire rods, Gyeong wire rods, and plated wire rods, has launched a fundraising effort to increase its aluminum fine wire rod production. It plans to raise 16.5 billion KRW through a rights offering and use the entire amount for facility investment.

According to the Financial Supervisory Service's electronic disclosure system on the 29th, Dongil Steel resolved to conduct a rights offering allocating 0.293 new shares per one existing share. The planned issue price of the new shares is 3,105 KRW, with a total issuance of 5.3 million shares.

The raised funds will be invested to expand production capacity and improve productivity in the fine wire rod segment. In December 2015, Dongil Steel expanded its business scope from the existing steel-centered industry to non-ferrous metals by establishing aluminum fine wire rod facilities at its Anseong plant. As demand from key forward markets such as automotive customers increased, the company steadily increased fine wire rod production. Due to environmental regulations, the sales of electric vehicles have risen, leading to increased demand for lightweight aluminum fine wire rods.

Monthly production capacity increased from 600 tons in 2019 to 1,100 tons in the first half of this year. After completing the expansion using the raised funds, monthly production capacity will reach 1,900 tons. It is estimated that in 2023, when the facility investment is expected to be completed, sales in the fine wire rod segment will reach 66.2 billion KRW, a 233.7% increase compared to 2020.

Dongil Steel plans to add a new casting line to the existing casting line to respond to various production types. This is a facility investment aimed at increasing sales through the production of new forged parts.

The company's focus on investing in fine wire rod production facilities appears to be driven by the judgment that this segment has greater growth potential compared to existing business divisions. As of the first half of this year, sales from the wire rod and Ma Bong wire rod segments accounted for about 75.4% of total sales. The share of the fine wire rod segment has been gradually increasing, rising from 10.8% in 2019 to 16.1% last year, and 23.9% in the first half of this year.

Sales in the first half of this year reached 85.1 billion KRW, a 37.26% increase compared to 62.0 billion KRW in the same period last year. Operating profit was 5.2 billion KRW, approximately a 766.67% increase from 600 million KRW in the previous year. Strong demand from forward industries such as automotive, construction, and home appliances has improved Dongil Steel's performance. The rise in product selling prices due to steel shortages, along with a decrease in cost of goods sold ratio, also contributed to the increase in operating profit.

Financial stability is relatively high. As of the end of the first half of 2021, total liabilities stood at 23.8 billion KRW, with a debt ratio rising by 2.82 percentage points from the end of the previous year to 17.28%. Total liabilities increased by about 5 billion KRW compared to the end of last year due to increased accounts payable from securing inventory assets. Total borrowings have remained below 1 billion KRW from 2019 through the end of the first half of this year. The borrowing dependency ratio was 0.3% as of the first half, indicating virtually debt-free management. The current ratio has been maintained between 400% and 600% from 2017 through the first half of this year.