Youngpoong Group Pushes for Korea Zinc Acquisition Amid Declining Performance…An Overambitious Move?

 

 

 

 

The sense of crisis is growing across Youngpoong Group as its major affiliates continue to report poor performances.

In particular, Youngpoong Electronics, which had been a supplier for Apple, is expected to incur significant losses due to issues such as defective components and a reduction in supply volume to its client. Given this situation, there are concerns that Youngpoong Group’s attempt to acquire Korea Zinc, the world's top non-ferrous metal smelting company, is an overly ambitious move.

Youngpoong Electronics had long established itself as a key supplier to Apple by providing flexible printed circuit boards (FPCBs) for iPhone displays. However, in 2022, defective components were detected in the supplied products, leading to a decrease in Apple’s orders, which in turn caused a sharp decline in Youngpoong Electronics' revenue and profitability.

The company’s revenue, which stood at KRW 720.2 billion in 2022, dropped 35.1% to KRW 467.2 billion the following year, while operating profit plunged 88.2% from KRW 90.2 billion to KRW 10.6 billion over the same period.

Notably, the company’s cumulative revenue for the first three quarters of last year fell 57% year-on-year to KRW 149.1 billion, while net profit turned into a deficit, recording a loss of KRW 17.4 billion.

Furthermore, the company has seen a mass exodus of key technical personnel, engineers, and production workers to competitors, which has further dampened expectations for a potential business recovery.

Amid the deteriorating performance of its major affiliates, Youngpoong Group is being criticized for pushing ahead with an aggressive merger and acquisition (M&A) strategy to gain control of Korea Zinc.

Although Youngpoong Group is the largest shareholder of Korea Zinc, it currently does not have management control over the company.

As a result, some analysts interpret the group’s move as an attempt to bolster its control over Korea Zinc in order to offset its worsening financial performance. However, given that Youngpoong Group’s key affiliates—including Youngpoong Electronics, Korea Circuit, and Youngpoong itself—are all recording deficits, doubts have been raised about whether the group has the capability to manage a large corporation like Korea Zinc.

An industry insider commented, “Youngpoong Group is already facing a crisis due to deteriorating business performance, so it is questionable whether it has the ability to operate Korea Zinc, which is several times larger than the group itself.”

Meanwhile, Youngpoong Group's Sukpo Smelter was fined approximately KRW 28 billion by the Ministry of Environment for illegally discharging cadmium, a heavy metal, into the Nakdong River. The company contested the decision by filing an administrative lawsuit but lost the case.

On the 27th, the Seoul Administrative Court ruled, “It has been confirmed that cadmium was released into the Nakdong River from Sukpo Smelter between April 2019 and April 2021,” affirming the Ministry of Environment’s decision to impose the fine.

According to the ministry’s investigation, in 2019, emissions from the smelter’s chimney contained air pollutants exceeding the legal limit by up to 9.9 times, while groundwater in the surrounding area showed cadmium concentrations surpassing water quality standards by 330,000 times.

Youngpoong argued that the administrative penalty was unjust, citing the fact that it was acquitted in a related criminal trial. However, the court ruled that the outcome of the criminal case does not directly affect the legitimacy of the administrative penalty.

Youngpoong Group is facing increasing management burdens due to the poor performance of its major affiliates and ongoing environmental controversies.

With Youngpoong Electronics and Korea Circuit suffering financial setbacks and Youngpoong’s Sukpo Smelter embroiled in environmental pollution issues, the crisis within the group continues to deepen.

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Youngpoong Group Pushes for Korea Zinc Acquisition Amid Declining Performance…An Overambitious Move?