28 March 2005 00:01 [Source: ACN]
OVERSEAS investments, a new cracker, and merging the recently acquired companies with itself are a few options being considered by Honam Petrochemical as part of a long-term plan that it expects to draw up by the summer of this year, according to company sources.
Details about the new plan are still sketchy, but one source said various alternatives are being explored, including capacity expansions in South Korea, overseas investments, and the feasibility of moving upstream and/or downstream. ‘We are trying to determine the direction that Honam should take,’ added the source.
A second company source indicated that a new cracker was also being considered, along with a possible expansion of the recently acquired Hyundai cracker.
Honam and LG Chem jointly acquired Hyundai Petrochemical in 2003. Hyundai was split into three companies last year, with Honam taking over the operation of Hyundai’s 650 000 tonne/year cracker and derivative units in Daesan, South Korea. This has now been renamed Lotte Daesan Petrochemical.
Expansion opportunities at KP Chemical, which was acquired last year, were also being evaluated, said the second source.
Honam will also look at the possibility of merging KP Chemical and Lotte Daesan with itself. A merger would mean a single management and therefore more effective operations, said the first source.
A 10-member team drawn from Honam, Lotte Daesan and KP Chemical has been working since December on developing the new strategy. Consultants from the Boston Consulting Group are assisting the team.
Honam’s last long-term strategy, introduced in 1995-96, had set a goal of achieving annual sales of Won5000bn (US$4.93bn) by 2005. ‘As this goal has nearly been accomplished, we are now looking at a new vision,’ said one Honam source. Honam posted sales of Won1950bn in 2004 and has set a target of Won2050bn for 2005. The figures exclude sales by Lotte Daesan and KP Chemical.
Analysing Honam’s strengths, the source believed that the major plus point was the company’s strong financial structure, with a low debt level and plenty of cash. Honam also has a good domestic market share for products such as monoethylene glycol and high-density polyethylene. However, its weakness is its size relative to global majors. Honam has also traditionally been conservative about investing outside South Korea.
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