Growth is a positive sign for future
Driven by growth in the market for nonwoven fabric, which is the raw material used to make synthetic leather, Dong Kwang Chemical has seen an average annual growth of 26 percent in the past five years.
Last year, it had a revenue of 71.4 billion won ($67.1 million) and posted 4.8 billion won in operating profit. It has added production lines of nonwoven fabric and synthetic leather materials to its retail business supplying raw materials for synthetic leather.
With the production lines and materials to make synthetic leather, Dong Kwang Chemical is expected to continue growing and see its sales expand.
The key to Dong Kwang Chemical’s success is the company’s exclusive sales contract with Taiwan-based San Fang, the world’s No. 1 producer of synthetic leather for shoes.
In addition to the stable revenue from supplying materials to San Fang, Dong Kwang Chemical has other major global clients and is managing business risks by continuously diversifying its client portfolio.
Furthermore, the company has completed vertical integration of its value chain for synthetic leather by acquiring production plants for its materials and nonwoven fabrics and incorporating them into its existing retail business.
After it established a nonwoven fabric production plant in Vietnam, Dong Kwang Chemical is now able to respond more actively to increasing demand in the nonwoven fabric market. Also, by producing its own artificial leather, the company can create synergy between its supply and retail businesses.
Through this expansion of its areas of business, it is expected that Dong Kwang will expand its customer base further and secure more global clients.
Dong Kwang Chemical is also expected to grow by developing new products in line with customers’ demands and in response to the market.
The stable growth of the artificial leather industry will also work in the company’s favor.
The industry is rapidly expanding along with the demand for IT devices, automotive interior upholstery, furniture fabrics and traditional areas for synthetic leather, such as shoes and garments.
Dong Kwang Chemical will establish a concrete sales portfolio as it aims to supply more materials to Hyundai Motor, Samsung Electronics, Hewlett-Packard and IT device consumers.
Its strategy is to secure a future growth driver by developing highvalue, eco-friendly materials.
To this end, the company is boosting its R&D capacity by constructing a new research laboratory, entering new markets such as Japan and Europe and securing new sales.
In addition, Dong Kwang Chemical is actively pursuing internal changes, such as setting up a human resource management system to help motivate employees.
It is preparing for an initial public offering in 2017, based on its performance over the next two to three years.
Its ultimate goal is to become a globally competitive synthetic leather maker.
Although it is facing some challenges, Dong Kwang Chemical’s future looks bright.
KIM MIN-SUNG, IBK PRINCIPAL CONSULTANT