Amid Soaring Exchange Rates, 'Nonggige' Is Smiling

Daedong's First Half Sales Increase by 28.2%... Expected to Reach 1.4 Trillion Won This Year
TYM Also Expected to Surpass 1 Trillion Won in Sales for the First Time This Year
Won-Dollar Exchange Rate at 1,400 Won Level... Exchange Rate Benefits Agricultural Machinery with High Export Share

[Asia Economy Reporter Kwak Min-jae] Although the won-dollar exchange rate has surpassed the 1,400 won level, placing a tremendous burden on our economy, the performance of agricultural machinery companies continues to soar. Agricultural machinery companies have a high proportion of domestic procurement of raw materials, while exports to regions such as North America account for more than half of their annual sales, resulting in a high export ratio. Moreover, since the spread of COVID-19, their market share in North America has rapidly grown, allowing them to greatly benefit from the exchange rate.

Daedong, the number one domestic agricultural machinery manufacturer, recorded sales of 1.1798 trillion won (consolidated basis) last year, surpassing 1 trillion won for the first time in the company's 70-year history. Considering sales of 834.4 billion won in 2019 and 895.8 billion won in 2020, the performance increase after COVID-19 is particularly notable. This year's performance growth is also remarkable. Daedong actively exports tractors and other equipment to overseas markets including North America, recording sales of 814.2 billion won in the first half of this year. This represents a 28.2% increase compared to the same period last year, and if this trend continues, annual sales are expected to reach 1.4 trillion won this year.

Industries with a high export ratio are generally considered beneficiaries of exchange rate increases. As the value of the won falls, price competitiveness in overseas markets improves, leading to increased sales. A Daedong official explained, "When setting business plans such as target sales and operating profit, we conservatively set the base exchange rate, but the current exchange rate exceeds this figure," adding, "Given the recent performance, the exchange rate effect is significant, increasing the likelihood of exceeding the targeted sales."

Daedong's export ratio last year was about 65% of total sales, with North America accounting for 80% of the export regions. The company mainly sells tractors and multipurpose carriers, with small to medium-sized tractors in the 20 to 60 horsepower range being the best sellers in the North American market.

TYM, considered the other 'big two' domestic agricultural machinery company alongside Daedong, is also expected to surpass 1 trillion won in sales for the first time this year, buoyed by strong exports and exchange rate effects. TYM recorded sales of 713.3 billion won in 2020 and 841.5 billion won last year, with sales reaching 690.7 billion won in the first half of this year alone. TYM's agricultural machinery segment, including tractors, combines, and rice transplanters, accounts for more than 97% of total sales, with about 52% of total sales generated from the North American market.

Along with the exchange rate, COVID-19 also created opportunities in the agricultural machinery market. As people spent more time at home due to the pandemic, the number of 'hobby farmers' cultivating farms as a hobby increased in developed countries, driving demand for small to medium-sized tractors. The market for tractors under 100 horsepower in North America grew by more than 10%, and Daedong, seizing this opportunity with aggressive marketing, expanded retail sales of tractors and carriers to 22,000 units last year, a 32% increase compared to the previous year.