Sales and Operating Profit Double
Benefit from Surging Transaction Volume and 'Kimchi Premium'
"Rowing While the Tide Is In"
Active Group-Level Support
Hoban Group is beaming with joy amid the booming gold market. Its affiliate, Samsung Gold Exchange, has been playing the role of a 'cash cow,' posting record-breaking performance last year. Even Hoban Construction, the group's core company, is stepping up to provide support, creating an atmosphere of concerted effort.
Sales and Operating Profit Jump to Twice the Average Level
Samsung Gold Exchange, which is set to announce its full-year 2024 results at the end of this month, is expected to have achieved its highest performance since its founding in 1945. A representative from Samsung Gold Exchange said on the 11th, "Although the settlement is not yet finalized, sales are estimated to have more than doubled compared to the previous year, and operating profit is estimated to be in the 10 billion KRW range. This is due to the company entering a stabilization phase since Hoban Group's acquisition in 2020, as well as the unprecedented boom in the gold market."
Just a year ago, Hoban Group was not seeing much success in the gold business. Since the 2020s, it recorded sales of about 1 trillion KRW and operating profits in the 3 to 4 billion KRW range. In particular, in 2023, it posted sales of 1.0293 trillion KRW and an operating profit of 31.1 million KRW. One-off cost increases further reduced profits. The surge in demand and increased transaction volume due to last year's gold craze had a significant impact. Especially, the 'Kimchi Premium,' where domestic gold prices were higher than international prices, contributed to the improved performance. The Kimchi Premium exceeded 20% at times last year. This means that the selling price rose significantly compared to the purchase price of gold, allowing for greater profit margins.
Korea Gold Exchange, which divides the gold distribution market, also saw its sales double in the first half of last year compared to the same period the previous year. The gold exchange operates by purchasing gold from refining companies such as LS MnM and Korea Zinc and selling it to retailers in the Jongno precious metals market, generating profits from the margin. With a cost of sales ratio of 99%, the commission is low, so it adopts a 'low margin, high volume' strategy to maximize profits by selling large quantities.
Acquisition as Part of Business Diversification... Active Support
Samsung Gold Exchange was established in 1945 and was acquired by Hoban Property, an affiliate of Hoban Group, in 2020. This was during a period when Hoban Group was actively pursuing 'business diversification' by consecutively acquiring companies such as Daehan Electric Wire, media outlets, resorts, and golf courses. Kim Yoon-hye, the eldest daughter of former Hoban Group Chairman Kim Sang-yeol, is the largest shareholder of Hoban Property.
Hoban is actively providing support at the group level. The atmosphere is like rowing while the tide is in their favor. Through Hoban Construction and Hoban Property, they have supported a total of 55 billion KRW over the past three months via participation in paid-in capital increases and short-term loans. With these funds, Samsung Gold Exchange is securing more gold by directly importing from overseas companies in addition to domestic suppliers.
Meanwhile, thanks to the growth of Samsung Gold Exchange, Hoban Group is expected to partially offset the sluggishness in its 'core' construction business. Hoban Group recorded an operating profit of 557.3 billion KRW (sales of 8.1672 trillion KRW) in 2023. Although last year's results have not yet been disclosed, the group's operating profit is expected to decline due to the construction industry downturn. The proportion of Samsung Gold Exchange's contribution to the group's operating profit, which was previously less than 1%, is expected to expand to over 2%.
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