Cutting Employee Salaries in the 30 Million KRW Range Amid Deficit... CEO Raises Annual Salary to 490 Million KRW [At a Crossroads: Listed Companies] Foodnamu②

CEO Kim Young-moon Raised His Own Salary Despite Deficit
Receiving Around 500 Million KRW Annual Salary... 3-Year Average 60% Pay Increase
Company Faces Financial Red Flags Amid Deficit... Employee Salaries Also Decreased

Kim Young-moon, CEO of Foodnamu.

Foodnamoo, the operator of the convenient health food platform ‘Rankingdakcom,’ has been accumulating losses due to management failures, while CEO Kim Young-moon and Vice CEO Kim Young-wan have been continuously increasing their own salaries.

According to the Financial Supervisory Service’s electronic disclosure system on the 11th, Foodnamoo paid a total of 978.52 billion KRW in compensation to its two registered directors last year. The two registered directors of Foodnamoo are CEO Kim Young-moon and Vice CEO Kim Young-wan. They each received an average salary of 489.26 billion KRW.

Their annual salaries have been on the rise every year. The average compensation for registered directors, which was 185.77 million KRW in 2021, increased to 340.68 billion KRW in 2022, and rose to nearly 500 million KRW last year. This represents an average annual growth rate of about 60%.

Meanwhile, Foodnamoo’s performance plummeted during the same period. Foodnamoo recorded consolidated sales of 191.2 billion KRW and an operating profit of 1.5 billion KRW in 2021. Although sales slightly increased in 2022, the company turned to an operating loss. Last year, it recorded sales of 190.7 billion KRW and an operating loss of 17.8 billion KRW, significantly expanding the deficit. In the first quarter of this year, it posted an operating loss of 7.4 billion KRW, an increase of about 150% compared to the same period last year.

The reason the company turned to losses starting in 2021 is attributed to aggressive expansion into new businesses. In 2021, Foodnamoo established subsidiaries engaged in cultured meat and alternative meat businesses, food franchise operations, and wholesale of fresh and processed foods. In 2022, it also started space rental, smart logistics, and ERP software businesses. As a result, the number of subsidiaries increased from one in 2020 to seven last year.

However, the subsidiaries for new businesses have been incurring large losses. Some entities have fallen into complete capital erosion. As of the end of last year, FN Fresh recorded a loss of 4.2 billion KRW, and FN Anisty posted a loss of 2.3 billion KRW. FN Place, FN Block, and the Vietnamese subsidiary ‘CONG TY TNHH FOODNAMOO VIETNAM’ were also all in the red.

Due to the many projects undertaken, the company raised a large amount of debt, worsening its financial structure. The debt ratio exceeded 700% as of the end of the first quarter of this year, and current liabilities due within one year reached 78 billion KRW. In particular, interest expenses increased sharply due to the heavy debt. Interest expenses, which were around 20 million KRW in 2021, surged to 2.6 billion KRW last year, an increase of 11,291.5%. This is cited as one of the main causes of the losses.

As the deficit grew, Foodnamoo reduced employee salaries. As of the end of last year, the average salary per employee was 30.85 million KRW, down 12% from 35.25 million KRW in 2022. The total number of employees also decreased from 218 to 201. This contrasts with the more than 40% increase in salaries for CEO Kim and Vice CEO Kim during the same period.

The reason CEO Kim and Vice CEO Kim continue to receive high salaries despite the company’s losses is presumed to be due to interest on stock-backed loans. In June last year, they pledged up to 35% of their total shares as collateral and borrowed 21.8 billion KRW. The interest rate ranged from 5.38% to 6.7%. This means they have to pay about 1.3 billion KRW annually in interest. Ultimately, they repaid the loans by selling shares off-market, and currently, about 5 billion KRW in loans remain. However, some of the borrowing was done at higher interest rates than last year. The current highest interest rate is 9.69%.

Foodnamoo was contacted for comment but did not respond.