[Funding] Husteel to Enter Offshore Wind Power Market through Rights Offering

Allocation of 0.38 New Shares per 1 Old Share... Plan to Raise a Total of 89.8 Billion KRW
Investing 172 Billion KRW to Establish a Large-Diameter Steel Pipe Factory in Gunsan
Secured 100 Billion KRW through Secured Loans... Entering Offshore Wind Power and Large-Diameter Pipeline Markets

[Asia Economy Reporter Hyungsoo Park] HuSteel is making a large-scale investment to enter the large-diameter market such as offshore wind power and oil pipelines. It will raise funds through a rights offering to shareholders.

According to the Financial Supervisory Service's electronic disclosure system on the 19th, HuSteel is promoting a paid-in capital increase by a rights offering allocating 0.38 new shares per existing share, followed by a general public offering of forfeited shares.

Including 2.13 million shares allocated to the employee stock ownership association, a total of 17 million shares will be issued. The planned issue price of the new shares is 5,280 KRW, and it is expected to raise a total of 89.8 billion KRW.

All the raised funds will be used to establish a large-diameter steel pipe factory in the Gunsan 2nd National Industrial Complex. By producing large-diameter steel pipes, HuSteel aims to pioneer the green energy market with high growth potential. It will also enter the large-diameter oil pipeline market to increase exports. HuSteel expects synergy effects with its existing small and medium-diameter steel pipes. It is estimated that a total of 172 billion KRW will be spent to establish the large-diameter steel pipe factory, and it will secure a loan of 100 billion KRW using the Gunsan factory as collateral. The remaining funds will be raised through the capital increase to complete the investment. The Gunsan factory is scheduled to be completed by the end of next year, and large-diameter steel pipe production will begin in earnest from 2024. It is expected to produce 165,000 tons of large-diameter steel pipes annually.

The global offshore wind power market is projected to increase its new installation capacity from 21.1 GW in 2021 to 31.4 GW in 2026. The growth of offshore wind power generation may lead to increased steel demand for supplying substructures.

Introducing large-diameter steel pipe facilities will enable product diversification and entry into new markets. By entering the large-diameter oil pipeline market, it is expected to increase exports and expand sales in the domestic oil pipeline market. Looking at HuSteel's sales trend, sales decreased from 537 billion KRW in 2019 to 365.6 billion KRW in 2020, then recorded 616.5 billion KRW last year, showing high volatility. HuSteel posted sales of 438.1 billion KRW and operating profit of 98.5 billion KRW in the first half of this year, increasing by 71.6% and 579.0%, respectively, compared to the same period last year. The rise in international oil prices due to the Russia-Ukraine war increased demand for well casing pipes and oil pipelines, boosting sales. Exchange rate increases also had an impact. Due to the nature of its business structure, sales are significantly affected by changes in the business environment of upstream industries such as shipbuilding and construction and ordering companies. The company aims to reduce volatility and pursue stable growth through product diversification.

Park Soon-seok, chairman of ShinAn Group and the largest shareholder, holds 24.65% (9,661,050 shares) of HuSteel. Including related parties, the shareholding ratio is 49.22% (19,288,580 shares). He plans to receive 7,321,550 new shares and participate in the subscription at 100%.

Amid recent increased stock price volatility, the final new share issue price and fundraising scale may change following the capital increase decision. HuSteel recently split its par value from 5,000 KRW to 1,000 KRW. The new shares resulting from the par value split were listed on July 13. The stock price has risen 146% this year. The stock price surged sharply in August. If the stock price moves significantly and the issue price changes after the rights offering decision, the fundraising plan may be disrupted.