[Exploration] Seha Welcomes New Owner: "Synergy with Hankuk Paper is Just Beginning"

[Asia Economy Reporter Hyunseok Yoo] "The synergy between Seha and Hankuk Paper has not yet materialized. Once the synergy between the two companies fully kicks in, we expect positive effects in various areas, starting with operations and raw material procurement."

Seha Hyeonpung Factory exterior. Photo by Hyunseok Yoo

On the 14th, at Seha's Hyeonpung factory in Daegu, CEO Lee Jae-seon expressed such expectations regarding the recent affiliation with Haesung Group.

Seha, engaged in the manufacturing of industrial white cardboard and box cardboard, was established in 1984. It has an office in Jung-gu, Seoul, and its headquarters and factory are located in Dalseong-gun, Daegu. White cardboard is mainly used for packaging in confectionery, cosmetics, and other industries. Major clients include Lotte Confectionery, Dongseo Food, Ottogi, and Mediheal. Last year, it recorded sales of 177.6 billion KRW and operating profit of 14.1 billion KRW. In the first quarter, sales and operating profit were 47.2 billion KRW and 5.4 billion KRW, respectively, representing an 11.63% increase in sales and a 164.43% increase in operating profit compared to the same period last year. This was influenced by the stabilization of raw material prices and increased sales of high value-added products. The company expects strong performance to continue into the second quarter.

Seha was acquired in March by a consortium of Hankuk Paper and Haesung Industry. Haesung Industry merged with its affiliate Hankuk Paper earlier this month. Welcoming Haesung Industry as its new largest shareholder, Seha is currently conducting a large-scale paid-in capital increase worth 41.7 billion KRW. The largest shareholder, Haesung Industry, will also participate through a general public offering of forfeited shares after shareholder allocation. Seha's short-term borrowings (including current portion of long-term debt) amount to 90 billion KRW, and the company plans to use most of the funds raised, about 40 billion KRW, to repay this debt. The company expects its financial structure to improve significantly through this capital increase. CEO Lee said, "If the paid-in capital increase proceeds as planned, we will be able to repay 40 billion KRW of borrowings," adding, "Interest expenses, which had exceeded 4 billion KRW annually, are expected to decrease to 1 to 1.5 billion KRW, and the debt ratio could drop from 352% to the low 100% range."

Lee Jeseon, CEO of Seha (left), and Jung Junmo, Executive Director (right), explaining the cardboard manufacturing process. Photo by Yoo Hyunseok

Synergies with Haesung Industry and Hankuk Paper are also anticipated. Since the main business areas of the paper industry groups differ, it is expected that there will be no negative impact but rather positive effects. CEO Lee explained, "Seha and Hankuk Paper can create sales synergy through each other's distribution networks," adding, "Positive effects will also appear in areas such as technology and the procurement of chemical raw materials."

The paper business is traditionally considered to have low growth expectations. However, in the white cardboard sector, an annual growth rate of 3-4% is anticipated. This is due to increased demand driven by the rise of single-person households and the growth of home meal replacements (HMR). CEO Lee emphasized, "Most products delivered to homes use white cardboard, and new sales are generated in emerging fields such as packaging for COVID-19 test kits and masks."

After the interview with CEO Lee, we toured various parts of the Hyeonpung factory. The white cardboard produced by Seha undergoes three main processes: ▲ the composition process, where waste paper (old paper) is mixed with chemicals and water to remove foreign substances and create fibers; ▲ the paper-making process, where the pulp mixture of raw materials and water is extruded, pressed, and dried to make base paper; and ▲ the finishing process, where the paper is cut and packaged into sizes and shapes requested by customers.

It was a cool day with rain during the visit. However, the internal temperature of the paper-making process exceeded 30 degrees Celsius, making it quite hot. Since steam is used for drying, it is inevitably hot throughout all four seasons. Executive Director Jung Jun-mo said, "Because steam must be continuously applied during the process, the internal temperature is high," adding, "Winter is somewhat better, but in summer, it feels like working inside a steam room."

The manufacturing process of white cardboard. Photo by Yoo Hyun-seok

The most striking moment during the process was when the grayish paper surface transformed into a glossy white sheet. This effect was achieved through the triple coating method, which Seha was the first in Asia to apply. Executive Director Jung explained, "This is a coating process where substances containing stone powder are applied to the base paper," adding, "This makes printed images and text appear more luxurious."

After all processes are completed, the white cardboard is cut into various sizes and shipped domestically and internationally. This process runs continuously every day. Executive Director Jung said, "The factory is always operating at full capacity, with an average utilization rate of about 96%," adding, "This is about a 1 percentage point improvement compared to last year due to yield enhancements."

Seha also plans to implement shareholder return policies in the future. Although it has not been possible due to financial difficulties, the company is determined to introduce dividend policies for shareholders who have endured hardships once the situation improves. CEO Lee stated, "If the paid-in capital increase proceeds, distribution volume will increase and profitability is expected to improve, among other positive factors," adding, "We will strive to pay dividends when conditions allow."

This content was produced with the assistance of AI translation services.