[Funding] Joil Aluminum's Investment to Secure Lead in Secondary Battery Cathode Foil Market

First Capital Increase in the Capital Market After Listing
MOU with Lotte Aluminum for Cathode Foil Material Business for Secondary Batteries
Sales Remaining Around 30 Billion KRW... Expecting Level-Up with Electric Vehicle Market Growth

[Asia Economy Reporter Park Hyungsoo] As governments around the world strengthen eco-friendly policies, the demand for aluminum is increasing. Aluminum is one of the materials that make up the frames of solar modules, which are renewable energy facilities, as well as wind power generation equipment and towers. In electric vehicles, demand is rising for aluminum alloys as a substitute for steel to reduce battery weight and improve fuel efficiency. Joil Aluminum has embarked on large-scale facility investment aiming to secure a leading position in the secondary battery cathode foil market for electric vehicles. The necessary funds will be raised through a rights offering to shareholders.

According to the Financial Supervisory Service's electronic disclosure system on the 26th, Joil Aluminum resolved a paid-in capital increase by a rights offering to shareholders with a general public offering of unsubscribed shares, allocating 0.16 new shares per one existing share. The planned issue price of the new shares is 2,185 KRW, and a total of 43.7 billion KRW will be raised. Of this, 12 billion KRW will be used for expansion, and 31.7 billion KRW will be used to repay short-term borrowings.

On August 25th, Joil Aluminum signed a memorandum of understanding (MOU) for joint cooperation in the secondary battery cathode foil material business with Lotte Aluminum. To expand raw material supply from the existing 5,000 tons to 40,000 tons, they decided to expand the hot rolling mill. Installation is expected to be completed by December next year.

The funds will be used to repay purchases of aluminum ingots and aluminum slabs through letters of credit (LC) opened with financial institutions. Since the balance of payments through LC is recorded as short-term borrowings, it is expected to improve the debt ratio and reduce financial costs.

Joil Aluminum is conducting a paid-in capital increase in the capital market for the first time since its incorporation in September 1985. It has steadily secured about 10-15% market share within the domestic aluminum market. Having produced aluminum plates for a long time, it has business stability. However, due to consistent order volumes from major customers, sales remained at around 30 billion KRW from 2018 to last year. Due to high costs spent on cost of sales, selling and administrative expenses, the company recorded losses. From 2018 to 2020, the average gross profit margin was 0.79%, the average operating profit margin was -2.56%, and the average net profit margin was -10.18%.

Even external auditors judged the industry growth potential as low, this year, with the increase in aluminum demand, Joil Aluminum's sales also increased. Sales in the first half exceeded 20 billion KRW, up about 27% compared to the same period last year. By raising selling prices, the cost of sales ratio decreased, and the company turned profitable. Entering the secondary battery cathode foil material business together with Lotte Aluminum, it has encountered an opportunity for external growth. However, having sustained losses until last year, its capacity for large-scale investment was limited, leading to fundraising through a capital increase. As of the first half of this year, it has liabilities of 183 billion KRW, a debt ratio of 144.97%, and a borrowing dependency of 46.41%. After completing the paid-in capital increase and repaying borrowings as planned, the debt ratio and borrowing dependency are expected to decrease to 100.72% and 34.81%, respectively.

The largest shareholder and related parties will subscribe to new shares worth 13 billion KRW in the capital increase to minimize dilution of their stakes and stabilize management rights. The largest shareholder's stake is expected to decrease from 44.81% to 42.35%.