Treasure Chest Subsidiary's Comeback Victory Pays Off

Exterior view of Donghwa Electrolite Nonsan Plant. [Photo by Donghwa Electrolite]

원본보기 아이콘

[Asia Economy Reporter Kim Jong-hwa] "Why on earth is a wood processing company buying a battery parts company?"

When Dongwha Enterprise, the No. 1 domestic particleboard market share holder, acquired the electrolyte manufacturer 'Panax Etec' in 2019, some shareholders opposed, saying, "It will become a burden later."

In August 2019, Dongwha Enterprise acquired Panax Etec, which manufactures electrolytes that transport lithium ions in lithium secondary batteries, from the private equity fund JKL Partners for 117.9 billion KRW. After the acquisition, the company was renamed 'Dongwha Electrolyte,' and despite some opposition, it actively invested to expand its global production bases.

An industry insider said, "Many people questioned why a wood processing specialist company would acquire a company producing secondary battery materials, and some investors sold their shares and left. However, I believe there is a strong possibility that in 10 years, Dongwha Electrolyte's sales will surpass those of its parent company, Dongwha Enterprise."

Dongwha Electrolyte recorded sales of 24 billion KRW in 2019, more than doubled to 53.3 billion KRW last year, and posted 14.5 billion KRW in sales in the first quarter of this year, showing a steep growth trend. The company has set a goal to exceed 400 billion KRW in sales by 2025, four years from now.

A Dongwha Enterprise official said, "Next month, we will operate an electrolyte plant with an annual production capacity of 20,000 tons in S?szk?t near Budapest, Hungary, and are considering building a plant in the United States to expand our global production bases, aiming to become the world's No. 1 electrolyte producer." He added, "Dongwha Electrolyte is the company that will lead the future of the Dongwha Group."

Exterior view of The Giban Animal Breeding Research Institute located in Anseong, Gyeonggi-do. [Photo by The Giban]

원본보기 아이콘

Founded in 2015 by Noroo Holdings, the seed breeding company 'The Giban' was a burden for the Noroo Group. Noroo, a paint company, developed paint products suitable for vinyl greenhouses and glass greenhouses and became interested in large-scale plant production methods.

A Noroo Group official said, "At the time, our major client, the global chemical company DuPont, was shifting its paradigm to an agricultural company, which led to deep reflection on Noroo Group's future. We judged that the seed industry would sustain the group in 20 to 30 years." He added, "Although there was much opposition at the time, questioning what a paint company was doing in the seed business, the owner's strong will allowed us to endure hundreds of billions of won in losses until now."

Sales began in 2017, but the company recorded losses of about 20 billion KRW over five years since its establishment. The seed industry is a demanding sector where breeding a single variety takes at least 10 years, but once developed, the varieties continue to be sold, making it a high value-added industry.

From 2019, sales started to increase as varieties bred over several years began to be sold. Sales grew about twofold each year, from 1.3 billion KRW in 2017, 3.3 billion KRW in 2018, 7.1 billion KRW in 2019, to 10.3 billion KRW last year, signaling entry into a full growth trajectory.

A Noroo Holdings official said, "We have steadily grown every year and recorded meaningful sales in the first quarter of this year. Having reached economies of scale, we expect to post profits this year. You will see the image of a butterfly shedding its cocoon and preparing for a splendid flight."

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.