"Entering Emergency Management, Need for Solid Management"
KCC Shifts Business Focus to Silicone
Expected to Concentrate on Expanding Silicone Business This Year
Jung Mong-jin, Chairman of KCC, declared an emergency management system in his New Year's address. Amid worsening internal and external business environments, Chairman Jung, who showed a commitment to strengthening sound management, is expected to continue expanding the silicone business, which he focused on throughout the past year.
On the 3rd, Chairman Jung stated in his New Year's address, "The year 2025 is expected to be the greatest crisis since the IMF crisis," adding, "The sales field is very important, and we must focus our sales power on customers and markets to overcome the crisis." He then emphasized, "All organizations must prioritize sound management centered on cash flow," declaring an emergency management system.
Chairman Jung also stressed securing a super-gap technological competitiveness. He said, "With growing uncertainties in the global economy such as the US-China trade conflict, it is expected to have a significant impact on us as well," and added, "Through super-gap technology, we aim to secure overwhelming competitiveness that can survive in any environment and strengthen the growth engine of our business."
Finally, Chairman Jung said, "Digital transformation based on data, the core asset of the AI era, is essential," and emphasized, "We must maximize the value of digital assets through company-wide integrated network construction and systematic data management, and strengthening the security system for this is essential."
From Chairman Jung's New Year's address, it appears that KCC will focus on the silicone business this year. In last year's New Year's address, Chairman Jung directly mentioned and emphasized silicone, calling this business a 'cash cow' and continuously strengthening investments throughout the year. As a result, silicone led KCC's performance growth last year. With a favorable business outlook this year, it is also analyzed that the 'sound management centered on cash flow' emphasized by Chairman Jung will be centered on silicone.
KCC's business consists of building materials, paints, and silicone. KCC has continuously shifted the business weight toward silicone. Building materials and paints are businesses whose profits fluctuate significantly depending on raw material price changes. In particular, paints are known to rely on imports for 60% of their raw materials. During the 'strong dollar' period when the won-dollar exchange rate records the high 1400 won range, they are inevitably more vulnerable.
On the other hand, silicone, a high value-added business, is relatively less sensitive to exchange rate and raw material price fluctuations. Silicone is a core material used in various industries such as automotive and architectural paints, cosmetic ingredients, adhesives for home appliances, and electronic equipment for aircraft. Looking at the sales by business in the first half of last year, silicone accounted for 45.3% of the total. Paints accounted for 27.9%, and building materials only 16.6%.
Thanks to silicone profits, KCC is also likely to achieve its first-ever annual operating profit of 500 billion won. Up to the third quarter of last year, KCC's cumulative operating profit was 372.8 billion won. The securities industry forecasted that the fourth-quarter operating profit would be similar to the third quarter's 125.3 billion won.
Accordingly, KCC recently began focusing on the silicone business by repaying part of the acquisition financing for Momentive. This has enabled a reduction of 40 billion won in annual interest expenses, and by improving financial soundness, it is evaluated that a foundation for securing super-gap technological competitiveness has been established. KCC expanded its business portfolio by acquiring Momentive, one of the world's top three silicone companies, in 2019.
There are also expectations that KCC will grow its silicone business and pursue a public listing. When acquiring Momentive, KCC aimed for a listing on the US Nasdaq market. However, the listing was canceled due to the downturn in the silicone market and the burden of acquisition financing interest. But with the recent recovery in the silicone market and reduced interest burden, it is expected that KCC will attempt the listing again.
A KCC official said, "We are focusing on securing technological capabilities through research and development and investment in future technologies such as materials and silicone," adding, "In the AI era, we will also accelerate infrastructure construction through digital transformation to strengthen the corporate structure."
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