Transfer of Glass Business to Affiliate Hanguk Glass Industry for 44.3 Billion KRW
Focusing on Overseas Business and Strengthening Fundamentals Amid Domestic Housing Market Slump
Building materials company LX Hausys is making changes by announcing a surprise performance in the second quarter of this year and reorganizing its struggling glass business.
On a consolidated basis, LX Hausys reported an operating profit of 49.4 billion KRW in the second quarter of this year, a 776.1% increase compared to the same period last year. While the securities industry had forecasted an operating profit of 19.1 billion KRW, the company recorded an earnings surprise that exceeded expectations. Compared to the first quarter (16.1 billion KRW), operating profit increased by 206.9%. Second-quarter sales were 938.5 billion KRW, down 1.1% from the same period last year but up 11.7% compared to the previous quarter.
The rise in performance was driven by improved profitability due to a decline in raw material prices. Prices of key raw materials such as polyvinyl chloride (PVC) and methyl methacrylate (MMA), which are used in windows and flooring, have fallen about 40-50% compared to the COVID-19 pandemic period. The price of Chinese PVC, which soared above 1,300 USD per ton in 2021, recently dropped to around 400 USD. Increased sales of high-performance insulation materials for construction and improved profitability in overseas businesses, including North America, also contributed to the performance increase.
LX Hausys is the number one domestic player in the window sector, competing with companies such as KCC and Eagon Window. LX Hausys has been producing coated glass, a key product for windows, in-house since 2012 to manufacture and supply finished products combining windows and glass directly. However, compared to KCC Glass, the leading coated glass company, and Korea Glass Industry, another LX Group affiliate, the business was not very profitable.
On the 27th, LX Hausys ultimately decided to transfer its glass business to Korea Glass Industry for 44.3 billion KRW. They handed over the coated glass factory located in Ulsan, assets, and other contracts and rights. Han Myung-ho, CEO of LX Hausys, who served as the first CEO when LG Hausys (now LX Hausys) was established in 2009, worked at other companies, and returned to his original company in April, is understood to have played a key role in this business restructuring with a strong will to improve profitability. Korea Glass Industry is the oldest flat glass manufacturer in Korea and was the first in the country to develop coated glass. The company had been competing closely with KCC Glass for the number one position in coated glass, but with this contract, it has quickly risen to become the top player.
The Fair Trade Commission did not raise significant objections to LX Group’s glass business restructuring. Considering the distribution structure of architectural glass, the situation of competitors, and the existence of alternative suppliers, it judged that the possibility of monopoly is low. However, taking into account the incentive for price increases, approval was granted on the condition that sales prices cannot be raised beyond a certain level for the next three years.
LX Hausys plans to focus on overseas market expansion in the second half of this year amid a sluggish domestic housing market. A representative of LX Hausys stated, "We plan to strengthen our overseas market penetration for artificial marble, industrial films, and commercial flooring," and added, "We will continue to focus on increasing profitability by continuously pursuing cost reduction."
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