[Funding] Iljin Display, Structural Improvement Difficult Despite Continued Investment by Chairman Heo Jin-kyu

Resolution on Rights Offering... 0.4 New Shares per 1 Existing Share
Huh Jin-kyu, Iljin Group Chairman, Plans to Subscribe 120% of Allocated Shares
Screen Touch Business Unit Faces Performance Decline Due to Decreased Customer Demand

[Asia Economy Reporter Hyungsoo Park] Iljin Display, a manufacturer of sapphire wafers and touch screen panels, has once again launched a rights offering after one year. Although the company is steadily expanding facilities and repaying debts to improve its structure, performance improvement is progressing slowly.

According to the Financial Supervisory Service's electronic disclosure system on the 6th, Iljin Display will issue 17,045,455 new shares through a rights offering allocating 0.4 shares per existing share, followed by a general public offering of unsubscribed shares. Separately from the existing shareholders' subscription, 3.41 million shares were allocated to the employee stock ownership association. The planned issue price for the new shares is 1,760 KRW, raising a total of 30 billion KRW. The final issue price will be determined on the 24th of next month.

Huh Jin-kyu, chairman of Iljin Group and the largest shareholder, plans to subscribe to 120% of the new shares allocated to him. The largest shareholder is allocated 3,407,560 new shares, and if participating in the 120% rights offering, he can acquire up to 4,089,072 shares. The largest shareholder is considering securing funds by utilizing proceeds from selling existing shares during the subscription of the rights offering.

The raised funds will be used for ▲raw material purchase payments ▲partial automation investment in the Vietnam subsidiary ▲repayment of matured foreign currency loans and general loans.

Previously, Iljin Display raised 24.6 billion KRW through a rights offering in February last year. The funds were used for expanding metal mesh touch panels for notebook PCs at plants in Pyeongtaek, Gyeonggi Province, and Eumseong, Chungbuk, new investments in flexible parts mass production, and facility funds related to sapphire ingot and wafer expansion. 5 billion KRW was also used to repay trade finance and general loans. At the time of the capital increase, the company explained that the facility investment was made considering market share expansion within customers and industry improvement.

Although the company aimed to secure mid- to long-term growth engines with funds raised from shareholders and the employee stock ownership association, Iljin Display's structural improvement has been slow. In July last year, the company issued convertible bonds (CB) worth 20 billion KRW to its affiliate Iljin S&T and Chairman Huh. They raised 15 billion KRW for operating funds and 5 billion KRW for facility funds. Currently, the stock price is below the conversion price.

Just over five months after raising 20 billion KRW, the board resolved another rights offering. Chairman Huh invested 15 billion KRW by participating in last year's rights offering and acquiring CBs, and now faces the need to invest again. Iljin Display's repeated fundraising is related to the sluggish performance of its core business divisions.

As of the third quarter of last year, the sales ratio by business division was 86.6% with 70.2 billion KRW from the screen touch business division and 13.4% with 10.9 billion KRW from the sapphire business division.

Sales in the touch screen business division decreased from 178.2 billion KRW in 2018 to 80.2 billion KRW in 2019 and 51.2 billion KRW in 2020. This was due to a sharp decline in demand from customers adopting Iljin Display's main products since 2018. To improve the performance of the screen touch panel division, Iljin Display developed OLED touch screen panels and foldable touch screen panels (1R) in line with the trend toward OLED and integrated panels. However, these products were not adopted as key components by customers.

The sapphire business division suffered due to oversupply mainly of low-priced Chinese products, price declines, and weak demand caused by COVID-19.

The debt ratio increased from 95.52% in 2018 to 150.88% in 2019 and 309.06% at the end of the third quarter of 2021. As of the third quarter of last year, consolidated borrowings amounted to 73.6 billion KRW. The current ratio also declined annually from 93.89% in 2018 to 45.46% in 2019 and 25.25% in 2020. With the current ratio below 100%, available liquid assets are almost nonexistent, indicating a fragile financial structure.

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