[Funding] Cosmo Chemical Advances Battery Recycling Business to Improve Profitability

Plan to Raise 45.1 Billion KRW through Rights Offering
30 Billion KRW Investment in Recycling and Lithium Extraction Facilities
Plan to Subscribe 120% of Shares Allocated to Major Shareholder

[Asia Economy Reporter Hyungsoo Park] Cosmo Chemical is set to actively pursue its battery recycling business. It will extract nickel and cobalt from secondary battery waste batteries and supply them to secondary battery precursor customers.

According to the Financial Supervisory Service's electronic disclosure system on the 4th, the company will raise 45.1 billion KRW by issuing 3.4 million new shares through a general public offering after a rights offering. The planned issue price of the new shares is 13,250 KRW, and 0.098 new shares will be allocated per one existing share.

Cosmo Chemical is a company that produces titanium dioxide. Recently, it absorbed and merged its subsidiary Cosmo Eco Chem, which produces cobalt sulfate, a key raw material for secondary battery cathode active materials.

Cosmo Chemical will invest 25 billion KRW of the raised funds to build a factory for the battery recycling business. 5 billion KRW will be used to install equipment capable of extracting lithium from battery scrap. Based on technology that extracts cobalt sulfate from primary ore, it has developed a process to extract key cathode materials from secondary battery waste batteries. It has also filed a patent and is moving forward with full-scale commercialization. Once the factory is operational, it is expected to produce 4,000 tons of nickel and 2,000 tons of cobalt annually.

The remaining 15.1 billion KRW will be used to secure battery scrap in advance. The plan is to start production and sales immediately upon completion of the battery recycling facilities.

According to global market research firm SNE Research, the global lithium secondary battery market size is expected to grow from 33.1 billion USD in 2018 to 351.7 billion USD by 2030. As the secondary battery market expands, the battery recycling market is also expected to grow naturally. Market research firm MarketsandMarkets forecasts the battery recycling market to grow from 17.2 billion USD in 2020 to 23.2 billion USD in 2025, with an estimated compound annual growth rate of 6.1%.

With high expectations for rapid growth in the battery recycling market, competition to secure technological leadership is fierce. In South Korea, companies such as Sungil Hightech, EcoPro CNG, LG Energy Solution, and GS Construction are also pursuing recycling businesses. Additionally, companies like Korea Zinc and Young Poong are preparing to supply sulfate products through battery recycling. Overseas, companies such as Umicore in Belgium, GEM and Brunp in China are also engaged in related businesses.

As competition for market dominance intensifies, Cosmo Chemical decided to raise business funds through a rights offering. As of the end of last year, the consolidated debt ratio and reliance on borrowings were 125.0% and 35.6%, respectively. With consolidated borrowings reaching 242.25 billion KRW, considering additional borrowings is difficult. The company has provided assets held as collateral for borrowings. Taking on more debt to pursue new businesses posed a significant burden.

Cosmo Chemical and its affiliates have continuously invested in facilities but have limited investment capacity. The quick ratio deteriorated from 59.2% at the end of 2019 to 39.0% at the end of last year.

Consolidated sales decreased from 678.094 billion KRW in 2018 to 406.823 billion KRW in 2019 and 355.52 billion KRW in 2020. Last year, sales recorded 512.614 billion KRW, a 44.2% increase compared to the previous year. The company also considered the business characteristics where sales scale and profit margins fluctuate depending on raw material prices while promoting the new battery recycling business.

The largest shareholder of Cosmo Chemical is Cosmo & Company, holding 27.7% of shares. Including related parties, the holding ratio is 30.9%. Cosmo & Company plans to participate in subscription up to 120% of the allocated shares. In May last year, Cosmo & Company raised 45 billion KRW by issuing convertible bonds. KB Stonebridge Secondary Private Equity Partnership, which acquired the convertible bonds, received 3.5 million shares of Cosmo Chemical as collateral. If Cosmo & Company fails to repay 45 billion KRW by the early redemption request date in May 2024, the collateral rights may be exercised.

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