"We Considered Borrowing for Investment, but Debt Would Have Risen Rapidly"
Existing Investments to Be Strengthened for Securing Growth Engines
On the morning of the 25th, when the Hanwha Aerospace shareholders' meeting was held at the Seongnam Chamber of Commerce and Industry in Gyeonggi Province, shareholders' faces could have been filled with smiles considering Hanwha Aerospace posted a record operating profit of around 1.7 trillion won last year amid a booming defense industry. However, that was not the case. Silence revealed a sense of gloom. This was due to the company executing a paid-in capital increase of 3.6 trillion won, the largest in the history of the domestic capital market.
Son Jae-il, CEO of Hanwha Aerospace, stated at the '2025 Shareholders' Meeting' held on the 25th at the Seongnam Chamber of Commerce and Industry in Gyeonggi Province that he will maximize shareholder value through swift and bold investments and contribute to the development of South Korea's defense industry. Photo by Hanwha Aerospace
The main topic at the shareholders' meeting was undoubtedly the paid-in capital increase. This was because the company suddenly pulled out a mega capital increase card that could cause losses to shareholders, despite the expectation of an additional operating profit in the 6 trillion won range over the next two years. Moreover, on the 13th, Hanwha Aerospace acquired a 7.3% stake in Hanwha Ocean, a company with high control by the Hanwha Group's controlling family, including Vice Chairman Kim Dong-kwan, by spending 1.3 trillion won. Just a week after this, the company launched a mega paid-in capital increase under the pretext of investment, leading to critical remarks in the market suggesting that the decision prioritized the interests of the controlling family over all shareholders.
The company seemed aware of this and reportedly made efforts to appease shareholders at the shareholders' meeting. Son Jae-il, CEO and chairman of the board, said in his greeting, "To achieve sustainable growth, active and swift responses are necessary, and as we planned to execute large-scale investments within a short period, there were difficulties in securing funds," adding, "Please understand that this was the best choice." Son also emphasized, "We considered investment plans through borrowing, but this would have rapidly increased the company's debt ratio," and "If the debt ratio spikes in the short term, the financial structure deteriorates, which would be relatively disadvantageous in competitive bidding. Considering this, the paid-in capital increase was the best choice."
Son further stated, "Through swift and bold investments, we will actively respond to the current situation and contribute to the development of South Korea's defense industry with responsibility as a leader in K-defense, alongside sustainable growth." Previously, Hanwha Aerospace announced that the funds secured through the paid-in capital increase would be invested in overseas defense with 1.6 trillion won, domestic defense with 900 billion won, overseas shipbuilding with 800 billion won, and engines for unmanned aerial vehicles with 300 billion won, respectively.
Hanwha Aerospace plans to achieve sales of 70 trillion won and operating profit of 10 trillion won by 2035 through this 3.6 trillion won paid-in capital increase. Son said, "Hanwha Aerospace will maximize the company's value through the paid-in capital increase and prioritize protecting and enhancing the future value of all shareholders, including minority shareholders, in its business operations."
After the shareholders' meeting, Son told reporters, "I explained that we will do our best to enhance shareholder value." A Hanwha Aerospace official also said, "There were not as many shareholder questions as expected at the meeting," adding, "Although the stock price experienced a short-term shock, both the mid-to-long-term vision and short-term performance and order prospects remain valid, so the market is expected to respond positively."
Before the shareholders' meeting, some voices called for Kim Dong-kwan, co-CEO of Hanwha Aerospace, to appear in person at the meeting to provide explanations. However, Kim did not appear at the shareholders' meeting that day.
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