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Doosan Group

Doosan Group pushes painful restructuring, bears fruit in Q1

By May 06, 2021 (Gmt+09:00)

Doosan's offshore wind turbines near Jeju Island
Doosan's offshore wind turbines near Jeju Island

Established in 1896 as a small fabric store in downtown Seoul, Doosan Corp. is the oldest surviving company in South Korea. Throughout the 20th century, Doosan Group grew into a leading player in the country’s food and beverage segment, spearheaded by its beer unit Oriental Brewery Co. (OB).

But in the 1990s, right before the Asian Financial Crisis, the group decided to undergo its first full-scale transformation into a heavy industries conglomerate with a focus on power plants, construction machinery and industrial equipment.

It was during this time when the group sold OB, the country’s beer industry leader with a majority share of the market, as well as its soju business and the distribution rights of Coca-Cola products, to acquire the companies that are now Doosan Heavy Industries Co. and Doosan Infracore Co.

Last year, the heavy industries conglomerate faced one of the biggest challenges in the group’s century-long history with the outbreak of COVID-19. Amid a potential liquidity crisis, Doosan Group in April last year was forced to submit a self-rescue plan to its creditors.

According to the plan, the major creditors including the Korea Development Bank (KDB) would inject 3.6 trillion won ($3.2 billion) of emergency funds into the group, which in turn would sell some of its key assets to raise 3.0 trillion won ($2.7 billion).  

To this end, Doosan Group sold Club Mow Country Club for 185 billion won ($164 million), Doosan Tower building for 800 billion won ($711 million), its battery foil maker Doosan Solus Co. for 698.6 billion won ($621 million) and oil pressure machine maker Doosan Mottrol Co. for 453 billion won ($403 million).

The sales process of Doosan Infracore, one of the group’s cash cow businesses, to Hyundai Heavy Industries Group for 850 billion won ($756 million) will also be completed in the third quarter of this year. The Doosan Infracore sale will mark the final stage of the group’s self-rescue plan.

UNEXPECTED EARNINGS GROWTH IN Q1

Some heavy industry analysts had projected that such aggressive sales by Doosan Group of its key assets and entities would aggravate its business circumstances.

Doosan Corp., the holding company, as well as its affiliates, however, beat expectations by reporting record-high results in the first quarter of 2021.  

Doosan Corp. posted an operating profit of 398 billion won ($354 million) in the first quarter, a striking 403.6% increase versus the same period in 2020. Likewise, Doosan Heavy Industries’ operating profit stood at 372.1 billion won ($331 million), up by 558% from the first quarter of last year.

Doosan Infracore and Doosan Bobcat Co. both posted their highest revenue and profit figures in the last 10 years.  

Experts credit Doosan Group’s earnings surprise to both the global economic recovery and its own painful self-rescue plan for financial solvency.

“It can be said that the case of Doosan Group provides a good example of corporate restructuring,” said an official of the Korea Development Bank, the group’s main creditor.

RENEWABLE ENERGY-DRIVEN FUTURE PLANS

Coming out of the liquidity crisis, Doosan Group is now pushing forward with its second full-fledged, group-wide business transformation in its century-long corporate history -- after its first successful shift in the 1990s -- into an eco-friendly energy company with a focus in the hydrogen segment.

The group’s main business unit, Doosan Heavy Industries, will reduce dependency on the thermal power plant business and focus on expanding its four strategic growth pillars: hydrogen; gas turbines; offshore wind turbines; and next-generation nuclear power. The group said its target is to make these four segments generate 60% of the heavy industry unit’s total annual sales by 2025.

Doosan Fuel Cell Co., the group’s fuel cell unit, is a leading company in the global hydrogen fuel cell market. The company won 1 trillion won ($889 billion won) worth of orders over the last three years.

Doosan Corp.’s wholly owned subsidiary, Doosan Mobility Innovation (DMI), developed and succeeded in manufacturing the world’s first hydrogen fuel cell-powered drone. DMI, together with Doosan Fuel Cell, plans to design industrial drones with a longer flight time.

A hydrogen-powered drone developed by Doosan Mobility Innovation
A hydrogen-powered drone developed by Doosan Mobility Innovation

Doosan Group also launched an internal task force last month to foster its hydrogen business as a key growth engine. The industry size of the global hydrogen market is set to grow to $12 trillion, according to Goldman Sachs.

“We are also considering global M&A options to rapidly ramp up our capabilities in the hydrogen segment,” said a Doosan Group representative.

Write to Kyung-min Kang at kkm1026@hankyung.com

Daniel Cho edited this article.
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