Park Chan-gu's 'Selection and Focus' Worked... Kumho Petrochemical, Will Synthetic Rubber Set a New Performance Record?

Operating Profit in Synthetic Rubber Sector, Set to Hit Record High Since 'Cha-Hwa-Jeong' Rally
60,000 Tons Expansion Amid Soaring NB Latex Demand

[Asia Economy Reporter Hwang Yoon-joo] Park Chan-gu, chairman of Kumho Petrochemical Group, is seeing his 'selection and concentration' strategy shine amid the novel coronavirus disease (COVID-19) crisis. Due to the explosive increase in demand for sanitary gloves (nitrile gloves) caused by COVID-19, Kumho Petrochemical's third-quarter performance, which produces NB latex, is expected to exceed expectations. Industry insiders are optimistic that Kumho Petrochemical's synthetic rubber division operating profit for the third quarter of this year could record its highest performance since the third quarter of 2011 (219 billion KRW).

According to securities information firm FnGuide on the 3rd, Kumho Petrochemical's consensus operating profit for the third quarter of this year is estimated at 167.6 billion KRW, a 143% increase compared to the same period last year. Notably, the securities industry has been steadily revising Kumho Petrochemical's operating profit consensus upward. It was revised from 87.2 billion KRW six months ago to 122.2 billion KRW three months ago, then to 157.4 billion KRW one month ago, and has recently been adjusted upward again.

The growing expectations for Kumho Petrochemical are due to the surge in demand for NB latex, the raw material for nitrile gloves. Kumho Petrochemical is the world's largest producer of NB latex, with an annual production capacity of 580,000 tons. This year, the global nitrile glove market size is expected to reach 338 billion pieces, a 20% increase from the previous year due to the impact of COVID-19. The market size is also expected to grow by 25% next year compared to this year. Accordingly, Kumho Petrochemical has raised the operating rate of NB latex to its maximum.

The background to Kumho Petrochemical's COVID-19 boom lies in Chairman Park's steadfast management strategy. When Park separated from Kumho Asiana Group, he stated, "Let's be number one in the world in at least one industry," adding, "I believe that is the management philosophy of integrity that my late father always emphasized."

Under this management principle, Chairman Park has been streamlining businesses unrelated or weakly competitive to Kumho Petrochemical's core 'chemical' competitiveness. Previously, the styrene-butadiene rubber (SBR) production line was downsized, and in February, the photoresist material business was sold to SK Materials. The proceeds from the sale will be used for investments in petrochemical businesses such as synthetic rubber and synthetic resin.

In particular, to strengthen the economies of scale of NB latex, Kumho Petrochemical plans to expand production by 60,000 tons in the second half of this year. As a result, sales of NB latex, a high value-added product made from synthetic rubber, have surged.

Park Yeon-joo, a researcher at Mirae Asset Daewoo, analyzed, "Due to increased demand for medical gloves and home appliances caused by COVID-19, special rubber, acrylonitrile-butadiene-styrene (ABS), bisphenol-A (BPA), and other market conditions are showing strength, and strong performance is expected to continue into the fourth quarter."

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