[Funding] EcoCap Expands Mexico Corporation Due to Increased Orders

[Asia Economy Reporter Hyungsoo Park] Ecocap has expanded its overseas subsidiaries to cope with increasing order volumes.

According to the Financial Supervisory Service on the 7th, Ecocap is raising funds through a rights offering followed by a general public offering of unsubscribed shares, allocating 0.4 new shares per existing share. The planned issue price of the new shares is 7,160 KRW, and a total of 5.6 million shares will be issued. By raising 40 billion KRW, the funds will be used for expansion capital, raw material purchases, and debt repayment.

The main products, automotive cables and wiring harnesses, are used more than 50% more in electric vehicles than in internal combustion engine vehicles. As the electric vehicle market grows, demand is likely to increase naturally.

Ecocap established a manufacturing plant in Mexico in 2018. It began operations in 2019 and sells through its U.S. subsidiary. As orders from first-tier suppliers to U.S. automakers increased through the U.S. subsidiary, the need to expand the Mexico plant grew. Ecocap decided to utilize a bridge loan from Shinhan Investment Corp., the underwriter of the rights offering, to fund factory expansion and raw material purchases. It will first borrow 16 billion KRW to expand the factory and purchase key raw materials such as copper and compounds.

After addressing urgent needs with the bridge loan and completing the rights offering, additional investments will begin. Using the proceeds from the rights offering, Ecocap plans to add ▲LED module surface mounting technology (SMT) equipment ▲lamp component equipment ▲power disconnect unit (BDU) SMT equipment ▲BDU assembly equipment ▲BDU functional testing equipment ▲ICS selective equipment. A new BDU production facility will be established to supply first-tier suppliers to U.S. automakers. BDU equipment is one of the power control components for eco-friendly vehicles such as electric and hybrid cars. It is installed between the battery and the load to connect or disconnect power.

Last year, sales reached 84.56939 billion KRW, a 16.4% increase compared to the same period the previous year. Sales increased as orders grew through the U.S. subsidiary. Operating losses were 3.68374 billion KRW, with the loss scale reduced compared to the previous year. However, due to rising copper prices, a key raw material, and increased transportation costs, the company failed to turn a profit. The Shanghai Containerized Freight Index (SCFI) steadily rose from 2018 through the end of the third quarter last year.

Ecocap’s debt ratio stood at 113.6% as of the end of the third quarter last year. Short-term and long-term borrowings were 26.85 billion KRW and 13.319 billion KRW, respectively. It is expected that repaying part of the short-term borrowings with the rights offering funds will reduce interest expenses.

Major shareholders Director Kim Chang-gyu and CEO Choi Young-cheon will subscribe to 30% of the new shares allocated to them. After the rights offering is completed, the major shareholders’ stake will decrease from 57.4% to 46.1%.