Share prices of all group affiliates, including its flagship units Kumho Industrial and Asiana Airlines, have plunged much faster this year than those of other conglomerates amid the bearish stock market.??
In an investor relations session, the nation’s seventh largest business group said its main construction arm Daewoo Engineering & Construction will dispose of securities worth 250 billion won, as well as sell stakes in a number of infrastructure projects to secure an additional 310 billion won. The builder also plans to put buildings and other tangible assets worth over 1.5 trillion won on sale.??
Kumho Industrial will raise a total of 1.1 trillion won by disposing of its stakes in affiliated units as well as real estate properties, while Asiana Airlines is to sell equity holdings in Kumho Life Insurance and other affiliates for an estimated 1.4 trillion won.??
Oh Nam-soo, president of the strategic management division at Kumho Asiana Group, told shareholders that the conglomerate has a sufficient amount of cash and other liquid assets to meet financial obligations, stressing it posted a relatively strong performance in the second quarter of the year, despite high oil prices and the housing market slump here.
“We currently hold 4.4 trillion won in cash. Our external liabilities amount to 13.5 trillion won, accounting for only 38.3% of our 36.7 trillion won assets,” he said.??
Oh stressed that the group will raise an additional 4.6 trillion won next year which will further improve its cash flow.??
Kumho Asiana Group posted 6 trillion won in revenue in the second quarter of the year, up 21% from a year earlier. Its operating profits rose 4.1% to 386 billion won, but net profit fell 19.5% to 227 billion won.
There is a rumor that Kumho Asiana Group is facing a liquidity crunch as it has to pay back loans and other financial obligations it accumulated over the past few years to acquire Daewoo Engineering & Construction and Korea Express.??
The group spent 6.5 trillion won acquiring the nation’s largest builder in 2006 and 4.1 trillion won to buy the largest delivery company earlier this year. ??
Cooper Tire & Rubber which holds a 10.71 percent stake in Kumho Tire is considering disposing of its shares. If the U.S. tire producer sells stocks back to Kumho, the Korean tire maker will have to pay 110 billion won under a share-buyback contract signed in February 2005, further worsening its cash flow position.??
With growing debts and other negative developments, shares of Kumho Asiana units have suffered steep losses since the beginning of the year. The group’s market capitalization has fallen 33% to 10.9 trillion won from 16.3 trillion won late last year amid bearish market sentiment.??
Shares of Kumho Industrial have dropped nearly 70% to 20,900 won per share as of Thursday from its peak of 90,700 won earlier this year. Asiana Airlines stocks have also been hit hard because of surging fuel costs in the wake of record-high oil prices.?(Tire Review/Akron)
