Deliberation on Inclusion of Essencore and SK Materials Air Plus on the 18th
Expectations for SK Ecoplant's Financial Structure Improvement and Business Synergy
New Appointment of Financial Expert President Kim Hyung-geun on the 15th
Following the acquisition of an industrial gas company, which is considered a 'cash cow,' SK ecoplant is set to incorporate a semiconductor-related company as well, reflecting its strong determination to succeed in its long-cherished initial public offering (IPO). After recently undertaking a major overhaul of its management team to ensure a successful IPO by 2026, the company is now seen as having completed the final piece of the puzzle.
According to industry sources on the 17th, SK ecoplant will hold a board meeting on the 18th to review the proposal to incorporate Essencore, a semiconductor processing and distribution company under SK, and SK Materials Airplus, an industrial gas company under SK Materials, as subsidiaries.
Essencore processes and distributes DRAM and NAND flash semiconductors supplied by SK Hynix into SD cards, USBs, and other smart devices such as laptops, smartphones, and tablets. Thanks to a stable supply chain, the company recorded an operating profit of 59.4 billion KRW and sales of 821 billion KRW last year. SK Materials Airplus produces industrial gases used in semiconductor processes and supplies them to SK Hynix and others. Like Essencore, it secured a reliable customer base and posted an operating profit of 65.3 billion KRW and sales of 257.6 billion KRW last year.
With these 'cash cow' companies incorporated into SK ecoplant, the company’s financial structure is expected to improve. SK ecoplant’s business environment has been deteriorating year by year. In construction, the sector has been struggling due to worsening real estate project financing (PF) conditions amid rising interest rates, and the environment and energy business recorded an EBITDA of only 451.7 billion KRW last year, about half of its target. The company posted a net loss of 33.6 billion KRW last year, turning to the red, and its net borrowings ballooned by over 1 trillion KRW to 4.29 trillion KRW within a year.
Synergies are also expected from a business perspective. Essencore can collaborate with SK Tes, SK ecoplant’s electronic waste recycling specialist subsidiary. SK Tes operates recycling facilities for data center servers and IT devices across 21 countries including the U.S. and Europe. When the value of DRAM and other products sold by Essencore declines, SK Tes can collect and recycle them. In the case of SK Materials Airplus, it could support the expansion of SK ecoplant’s engineering, procurement, and construction (EPC) business. SK ecoplant could take charge of the EPC for semiconductor industrial gas facilities for SK Materials Airplus. Currently, the company outsources plant construction to external firms due to a lack of in-house construction capabilities.
Industry insiders view this restructuring as a strategic move to ensure SK ecoplant’s successful IPO. Facing a red light on IPO promotion due to a decline in corporate value, SK ecoplant is expected to improve profitability and meet IPO requirements through mergers. SK ecoplant has pursued an IPO since its days as SK Construction but faced setbacks. In early 2018, it explicitly included IPO promotion in its business plan and pushed forward, but the plan was derailed in July of the same year when the Laos dam collapse caused its over-the-counter stock price to hit the lower limit. In 2021, the company rebranded as SK ecoplant by adding the environment and energy business and declared a renewed challenge.
Recently, the company also undertook a major management reshuffle. On the 15th, Kim Hyung-geun was appointed as the new CEO of SK ecoplant. Kim has been responsible for strategy, finance, and portfolio management at SK Group. He emphasized, "Aligned with SK Group’s focus on responding to the artificial intelligence (AI) era and environmental investments, we will achieve results in infrastructure development and semiconductor-related businesses," reaffirming his commitment to completing the IPO.
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