Exclusive
Kumho Development & Trading acquires JC Green Bio… Pursuing recycling business independently

[비즈한국] Kumho Petrochemical011780 Group affiliate Kumho Development & Trading has been confirmed to have acquired JC Green Bio on January 2. JC Green Bio is a waste recycling company based in Gimhae, South Gyeongsang Province. Kumho Development & Trading invested 11.3 billion won for the acquisition of JC Green Bio. Through this move, it appears that Kumho Development & Trading is making a full-scale entry into the waste management industry. Park Ju-hyung (45), the eldest daughter of Kumho Petrochemical Chairman Park Chan-koo (77), serves as vice president at Kumho Development & Trading. If the company’s waste management business proves successful, Vice President Park's influence within the firm is expected to rise.

Established in 2015, JC Green Bio is an integrated waste recycling company, notably recognized as a specialist in waste wood processing. Compared to Kumho Petrochemical, the scale of JC Green Bio is modest. As of the end of 2023, JC Green Bio’s total assets stood at 7 billion won, with annual revenue of approximately 5.8 billion won. In contrast, Kumho Petrochemical’s total assets reach 8 trillion won. It is understood that Kumho Development & Trading acquired the company with a long-term growth perspective rather than immediate performance gains.

As a trading firm, Kumho Development & Trading previously had no ties to the recycling business. However, it has recently shown aggressive moves toward business expansion. In February of last year, the company added several business objectives to its articles of incorporation, including: collection and transport of non-designated waste, treatment of non-designated waste, construction waste treatment, dismantling and sorting of non-ferrous materials, recycling of non-ferrous raw materials, and collection and sales of recycled materials. Industry observers believe the owner family's presence has influenced this expansion; Vice President Park Ju-hyung took office as an internal director at Kumho Development & Trading in May 2023.

Kumho Development & Trading is particularly active in recycling-related sectors. Last September, it established a subsidiary called Kumho Green Bio Busan, which is also a waste recycling company. The business objectives for Kumho Green Bio Busan include "import, distribution, and sale of construction materials and furniture raw materials" and "production, distribution, and sale of wood chips and sawdust," areas where synergy with JC Green Bio is anticipated.

It appears there was prior communication between Kumho Green Bio Busan and JC Green Bio. In October last year, Kumho Green Bio Busan acquired a factory in Gimhae, South Gyeongsang Province, owned by JC Green Bio, for 3.5 billion won.

The Kumho Petrochemical Group has shown interest in the recycling business at the group level, specifically in Recycled Styrene Monomer (RSM). RSM is an eco-friendly raw material obtained through the pyrolysis of waste polystyrene, used primarily in synthetic rubber or synthetic resin production. In August 2021, Kumho Petrochemical announced a partnership with the U.S.-based Agilyx to build an RSM plant. Furthermore, in November 2022, the group signed a Memorandum of Understanding (MOU) with France’s Technip Energies (T.EN) for cooperation in waste polystyrene pyrolysis and the RSM business.

However, Kumho Petrochemical's RSM business is progressing more slowly than anticipated. The RSM plant mentioned by the company in 2021 has yet to begin construction. A Kumho Petrochemical official stated, "Given the current downturn in the petrochemical industry and investment considerations, we are approaching the RSM business cautiously," adding, "Please understand that it is difficult to specify a timeline (regarding the start of construction) at this moment."

Neither JC Green Bio nor Kumho Green Bio Busan specializes in RSM. Therefore, the business community views Kumho Development & Trading's recycling business as separate from the Kumho Petrochemical Group’s core recycling initiatives. Kumho Petrochemical also clarified that this is an independent business move by Kumho Development & Trading rather than a group-wide effort.

The aforementioned official remarked, "It is difficult to link (Kumho Petrochemical’s) RSM business directly with JC Green Bio’s waste wood business. While both are in recycling, RSM uses waste plastic, whereas JC Green Bio uses waste wood. Please view the acquisition of JC Green Bio as an independent business objective of Kumho Development & Trading."

The official added, "(JC Green Bio) engages in the same business as Kumho Green Bio Busan, so while referring to it as a synergy is acceptable, it is more accurate to view it simply as an additional corporate entity. Rather than leading a pillar of the group's recycling business, it should be seen as playing a role as one pillar of Kumho Development & Trading's own business portfolio."

The success of this recycling business could boost Vice President Park Ju-hyung’s standing and voice within the company. However, as a latecomer to the waste wood recycling market, the business requires significant investment. The challenge lies in Kumho Development & Trading’s current financial situation. According to Kumho Petrochemical’s quarterly reports, the trading firm's revenue fell from 54.3 billion won in the first three quarters of 2023 to 44 billion won in the same period of 2024, a decrease of 19.16%. While the company posted a net profit of 2.3 billion won in the first three quarters of 2023, it recorded a net loss of 77 million won in the first three quarters of 2024, marking a shift into the red.

Some view the prospects for the waste wood recycling business positively, as the government is actively promoting the sector through its policies. The Ministry of Trade, Industry and Energy, the Korea Forest Service, and the Ministry of Environment announced in December last year that they would expand waste wood recycling. The Ministry of Environment stated, "We plan to separately classify waste furniture suitable for energy recovery, and exclude it from the Renewable Energy Certificate (REC) issuance target so that other types of waste wood can be prioritized for reuse or recycling. We will monitor the raw material supply status in the waste wood market and strive to resolve supply-demand imbalances through additional institutional improvements if necessary."