World Economy

South Korea Trading Firms Slimming Down, Moving Overseas

South Korea Trading Firms Slimming Down, Moving Overseas
South Korea Trading Firms Slimming Down, Moving Overseas

South Korea’s trading companies are sometimes called “all-around” companies for the sheer number of businesses in which they engage, from steel and construction to movie distribution and book publishing, but these behemoth agents of industry are now looking to shed some weight in hopes of raising their profitability.

Last year, operating profit at the country’s top five trading companies was 759.8 billion won ($676.8 million), down from 822.2 billion won in 2014. So, many of these companies are dropping unprofitable businesses while venturing into new promising areas overseas, Yonhap reported.

Posco Daewoo, the country’s largest trading company, currently engages in 68 different businesses, at least on paper. In February, it earned approval to work in steel frame construction and convention planning, and most recently, it took charge of finding a builder for a hotel in Yangon, Myanmar, that’s being managed by Hotel Lotte.

Posco Daewoo sees great opportunity in Myanmar, especially in real estate and resource exploration. It expects the country’s economy to grow at a fast rate for the foreseeable future. The trading company has already had success with an offshore gas field project in Myanmar that began in 2000. Another new area is food, which the company entered early this year.

Samsung C&T, the first trading company in Korea, is focusing on resource development and energy overseas. It is building solar and wind plants in Ontario, Canada, and expects the power plants to bring them stable profit for the next 20 years.

LG International has also initiated resource development and power plant projects in China, Oman and Indonesia. In Myanmar, it started building a cement factory three years ago that is due to begin commercial production within this year.

Hyundai Corporation is heading into the food business, leasing farmland and growing crops in Cambodia.

SK Networks has been shedding its non-core businesses, selling off its fashion business to Hyundai Department Store Group and liquid petroleum gas stations to SK Gas. Its wholesale petroleum and retail business, which used to account for a third its revenue, went to SK Energy.

“The latest trend in trading companies is expanding overseas and narrowing down businesses,” a Samsung C&T spokesperson said.

The government has maintained it will limit conglomerates from expanding into new businesses. On Wednesday, it extended the expiration date for 47 industries in which small and medium-sized companies are granted favor. The designation was due to expire this year.

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