S.Korean boiler manufacturers turn to overseas markets

Kyungdong Navien Co. revealed on Sunday that overseas sales account for more than 60% of its total sales on the back of strong exports to the United States.

The boiler manufacturer’s sales abroad reached 707.5 billion won ($568 million) last year, making up 64.1% of the total. 

In particular, the company’s exports to North America recorded 581.9 billion won, a 48.4% jump from the year prior. The figure is about 1.5 times more than that of domestic sales in the same period. 

Kyungdong cites the home renovation boom across the globe spurred by the COVID-19 pandemic as the main reason behind the surge in revenue. 

The company is the biggest player in the US condensing boiler and water heater market. As such, demand for its products skyrocketed during the height of the pandemic. 

The South Korean boiler market makes it hard for the manufacturers to enjoy a significant profit margin. 

Orders from construction companies that are building apartment complexes account for much of their sales on the peninsula. Due to the bulk nature of such orders, the buyers have the leverage when negotiating the prices. 

Analysts also view that the domestic market is already more saturated than elsewhere.

With the ultra-low population growth rate and the improvement in product quality that deters customers from purchasing new items, demand has slowed down in Korea. 

Kyungdong Navien’s sales of environmentally friendly boilers for at-home use plunged 38% on-year to just 113,600 units in 2021, according to data compiled by the Ministry of Environment. While part of the reason could be reduced government assistance for the sector, the company suffered a more rapid decline in sales than the 23% average slide of the industry. 

BLUE OCEAN

Kyungdong’s US arm is the company’s cash cow with a whopping 105.3% on-year increase in net profit to record 11.7 billion won for 2021. 

Other industry heavyweights such as Kiturami Boiler Co. and Daesung Celtic Co. are also keen on the North American market.

Kiturami first entered the market as an original design manufacturer (ODM) but plans to launch its own brand this year and expand its product lineup in North America. Daesung Celtic Co. has already launched its US brand named Vesta DS Inc. 

The three household names in South Korea are also in a tight race in Russia and China.

Kyungdong is considered Russia’s “national boiler brand” with the largest market share in the condensing boiler and water heater categories. As boilers are for the general public’s daily usage, exports of such items have not been negatively affected by the Russia-Ukraine war. 

In Greece, Kiturami boasts the largest share in the Mediterranean nation’s oil-fired boiler market. 

The company exports oil-fired boilers to Uzbekistan and other nations that were formerly part of the Soviet Union. Latin America, most notably Chile, Uruguay, and Brazil, is also a popular destination for Kiturami products.

When it comes to China, the manufacturers are hopeful boiler distribution will increase over time. 

While none of the Korean makers are reaping noteworthy profits from the Chinese market, they are operating factories there.

Write to Dae-Kyu Ahn at powerzanic@hankyung.com
Jee Abbey Lee edited this article.