[Funding] Jinyang Chemical Faces Profitability Decline Due to Intensified Flooring Material Competition

Expecting Growth Enhancement through Replacement of Aging Equipment in Synthetic Leather Sector

[Asia Economy Reporter Hyungsoo Park] Jinyang Chemical, one of the sore spots within the KPX Group, is raising funds through a rights offering to shareholders. The raised funds will be used to replace aging facilities and purchase raw materials.

According to the Financial Supervisory Service's electronic disclosure system on the 13th, Jinyang Chemical will conduct a paid-in capital increase through a rights offering to shareholders, allocating 0.317 new shares per one existing share, followed by a general public offering of forfeited shares. The planned issue price of the new shares is 3,065 KRW, and a total of 3.8 million shares will be issued to raise 11.6 billion KRW.

Jinyang Chemical is a company that manufactures flooring materials, synthetic leather, tarpaulin, and automotive fabrics. Last year, it recorded sales of 34.8 billion KRW, an operating loss of 3.9 billion KRW, and a net loss of 2.2 billion KRW. Sales decreased by 19.6% compared to 43.3 billion KRW in 2020. Its major customers are Kolon Glotech and Seogyeong SGF. It supplies automotive synthetic leather to Kolon Glotech and flooring materials to Seogyeong SGF.

As sales to major customers decline, overall sales are also decreasing. Profitability is worsening due to the sharp rise in crude oil prices and exchange rates.

One of Jinyang Chemical's main products is flooring materials. They are developed to meet various consumer demands such as residential, commercial, medical facilities, and educational use. The domestic flooring market is an oligopoly with LX Hausys, KCC Glass, and Hyundai L&C occupying about 76% of the market. In this oligopolistic market, Jinyang Chemical's market share exceeds 7%. Due to low market share and intensified competition in the oligopoly, flooring sales are gradually declining. The slowdown in real estate transactions due to the economic downturn may lead to slower growth in the flooring market.

Jinyang Chemical has set a strategy to find a breakthrough in the synthetic leather sector used in automotive seats, door trims, consoles, and headrests. Through its major customer Kolon Glotech, it supplies automotive synthetic leather to Hyundai Motor Company and Kia. It plans to invest in facilities for the synthetic leather sector through the paid-in capital increase. Existing production facilities will be replaced with new ones to improve quality and expand production capacity.

Additionally, to improve profitability, Jinyang Chemical expanded its factory building on its headquarters land in Ulsan on June 22 last year. It plans to generate income by constructing and leasing a new factory on idle land.

The largest shareholder, Jinyang Holdings, holds 60.58% of Jinyang Chemical's shares. It has decided to subscribe to all allocated new shares.

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