DIC, Turns Profitable and Accelerates Investment in US Kentucky Plant

DIC Gear Reducer

[Asia Economy Reporter Park So-yeon] DIC, which supplies electric vehicle reducers to Hyundai Motor Group and others, has turned profitable, enabling it to actively proceed with investment in its Kentucky plant in the United States. With improved cash flow and alleviated concerns over deteriorating financial structure, external financing conditions are also expected to improve.

According to the Financial Supervisory Service's electronic disclosure system on the 31st, DIC recorded consolidated sales of 590.1 billion KRW and an operating profit of 27.3 billion KRW last year. Sales increased by 19.6% compared to the same period the previous year, and operating profit turned positive for the first time in three years.

The recovery of orders for electric vehicle reducers, parts, and transmissions from Hyundai Motor Group, as well as U.S. companies G and T, led to improved performance. After facing difficulties until 2020 due to Hyundai Motor's reduction of its China business and worsening external conditions caused by COVID-19, orders from major clients have been rapidly recovering since last year.

Additionally, a significant increase in orders for excavator parts from Hyundai Heavy Industries and Hyundai Doosan Infracore contributed to the improvement in consolidated performance.

The deteriorated financial structure has also begun to recover. Due to consecutive net losses and increased debt, DIC's debt ratio soared to 756% at the end of 2020. With the current net profit reflected in equity capital, the debt ratio is expected to fall to the 400% range.

The company expects the trend of financial improvement to continue this year as profitability is also improving. Net borrowings (borrowings minus cash equivalents), which had increased to 460 billion KRW by 2018 due to investment in the China plant, are understood to have decreased to the low 200 billion KRW level last year.

DIC was approved by the Ministry of Trade, Industry and Energy as a representative 'business restructuring' company, shifting its focus from internal combustion engine parts to future-oriented automobile parts as its main industry. It is rapidly transforming into a company specializing in reducers and autonomous driving parts, which are core components of eco-friendly vehicles (electric and hydrogen vehicles), with the production ratio also increasing sharply.

DIC is negotiating for its U.S. subsidiary, Daeil USA, to locally produce and supply 300,000 units annually of electric vehicle reducers and parts for Hyundai Motor Group, Company G, and Company T starting from the second half of 2024. The plant in Maysville, Kentucky, U.S., has been completed for local production, and additional facility investments are required.

A DIC official said, "With improved performance, we can cover a significant portion of the investment costs ourselves," adding, "Once local production of electric vehicle parts in the U.S. is fully underway, the company's sales and profitability can greatly improve, making this turnaround to profitability a good milestone."

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