Contrarian leader's bets drive Kumho Petrochem's record profits

At the end of last year, executives of Kumho Petrochemical Co. were in a heated debate on whether or not to expand the capacity of nitrile butadiene (NB) latex, the raw material of surgical, industrial and cooking rubber gloves.  

Many of the attendants at the meeting took a largely defensive stance, warning of industrywide oversupply as its rival latex producers were competitively expanding capacity.

Driven by soaring demand for rubber gloves since the onset of the COVID-19 pandemic, Kumho Petrochemical pulled in a record operating profit of 741.2 billion won ($626 million) in 2020, more than double the previous year's.

But the industry watchers at the time were doubtful about whether the latex market boom would continue into this year amid expectations, albeit short-lived, that COVID-19 might be eliminated.

Despite such concerns, the petrochemical company's Vice President Park Jun-kyung, the eldest son of Chairman Park Chan-koo, argued that demand would remain strong even after the pandemic receded and decided to ramp up facility investment.

"We can sell as many as we make through our global network. I will take responsibility for my words," Park was quoted as saying in the meeting.

A year later, he proved to be right. The world's largest producer of NB latex is on course to earn a record operating profit of 2.5 trillion won this year. 

"At the time, many of us had a doubt about Park's aggressive sales strategy," said a Kumho source. "But now such worries disappeared."

Defying oversupply concerns, the price of NB latex more than doubled to $2,000 per ton in the first half of this year. Kumho Petrochemical's operating profit increased to close to 2 trillion won in the nine months to September, more than twice as much as its previous largest-ever operating profit of 842.2 billion won posted in the entire year of 2011.

Kumho controls 30% of the global market of NB latex, a type of synthetic latex.

The company plans to expand the NB latex capacity to 70,000 tons per year in Ulsan, southeast of Seoul, by year's end, according to industry sources on Dec. 15. That compares with its annual capacity of 620,000 tons.

In June, it decided to further expand its capacity to 950,000 tons by the end of 2023.

BUILDING TRUST IN SALES

Born in 1978, Park is a third-generation executive of the Kumho Asiana Group founded by his grandfather Park In-cheon in 1946.

After a three-year stint at Kumho Tire Co., he joined Kumho Petrochemical in 2010. Since then, he has been working on expanding its global sales network. 

Park's sales strategy could be defined as building trust with clients. During a Zoom meeting last year, a Malaysian latex glove maker complained of the excessively high price of Kumho's latex.

Park then immediately ordered its sales department not to raise the price too sharply. Consequently, the Malaysian client increased its order volume to Kumho, contributing to its profit increase.

Kumho derives about 70% of earnings from exports. Park was promoted as head of sales in June.

Write to Kyung-min Kang at kkm1026@hankyung.com
Yeonhee Kim edited this article.