[Funding] Paratech Invests in Expansion Amid Growing Demand for Firefighting Products

[Asia Economy Reporter Hyungsoo Park] Paratech has begun raising funds for expansion investment. As large buildings and large-scale logistics centers increase, the risk of large fires is also growing. With strengthened regulations under the Firefighting Facilities Act, the scope of mandatory installation of sprinklers and smoke control equipment is expanding. Paratech will expand its Seosan factory in Chungnam into a comprehensive firefighting equipment manufacturing plant.

According to the Financial Supervisory Service's electronic disclosure system on the 9th, Paratech will raise 27.2 billion KRW by issuing 25.3 million new shares. The planned issue price is 1,075 KRW per share, and the subscription period is from the 6th to the 7th of next month. The final issue price will be determined on the 1st of next month.

Paratech produces firefighting products such as sprinkler heads, kitchen automatic extinguishing devices, fire-fighting synthetic resin pipes (CPVC), and valves. In 1975, it was the first in Korea to obtain national certification for firefighting products. In 2011, it became the first in Korea to conduct its own quality inspection of sprinkler heads. It also independently developed high-capacity sprinklers and Early Suppression Fast Response (ESFR) sprinklers. Sales from the firefighting equipment manufacturing division increased from 65.4 billion KRW in 2019 to 70.7 billion KRW last year.

Amid increasing demand for firefighting products, Paratech is expanding its production plant in the Suseok-dong industrial complex in Seosan-si, Chungcheongnam-do. The facility will be equipped to produce sprinklers, CPVC valves and pipes on a total site area of 46,551㎡. Existing production equipment from the Bucheon plant will be relocated, and additional automation equipment will be installed. The company plans to increase production capacity and reduce logistics costs to improve profitability.

Among the public offering funds, 5 billion KRW will be used for the expansion construction of Building 10 at the Seosan plant and for purchasing machinery and equipment. Installation work for the machinery will be completed in the third quarter of this year, and the Seosan plant is scheduled to begin operation within this year. The Building 10 expansion will be a three-story building with an area of 7,181.88㎡.

Considering the rapid increase in order contracts since November last year, Paratech holds 22.5 billion KRW in cash and cash equivalents as of the end of the first quarter on a separate basis. It judged that liquidity is insufficient for operating expenses such as material purchases to respond to additional orders. About 17.2 billion KRW of the funds raised through the paid-in capital increase will be used as operating funds. Of the remaining funds, 5 billion KRW will be used to repay debt.

Paratech's consolidated current ratio rose to 227.35% at the end of 2021 from 204.52% at the end of 2020. This year, it has invested more than 10 billion KRW in expansion and paid a deposit of 2 billion KRW for the acquisition of land and buildings in Cheongdam-dong, Gangnam-gu, Seoul. The remaining 18 billion KRW is scheduled to be paid on October 31.