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Industrials
Heavyweights pack their punch
Industrial conglomerates in Korea and Taiwan continue to dominate
The credit crisis has, of course, affected the industrial sector, but the performance of companies such as Hyundai Motor shows that the market still offers room for growth. After all, industrial products are key to Asia’s growth, which is expected to continue even amid the global slowdown. These are the companies that make the plastics and petroleum products that are so ubiquitous in everyday life, as well as the planes, trains and automobiles that transport those products around the world.
Korea and Taiwan’s heavyweight companies, the Formosa and Hyundai groups, dominate the FA100 industrial league with Formosa fielding four companies and Hyundai three. New to the list this year is Daewoo Engineering & Construction, which maintains the list’s traditional North Asia focus.
Hyundai Motor, a top 30 FA100 company, and the only car manufacturer to make the list, impressed the market with its commitment to cutting costs, boosting its brand value and developing eco-friendly vehicles.
The won’s slide against the dollar helped Hyundai improve its price competitiveness overseas, while the rising yen hurt its main rivals in Japan. The company’s focus on fuel-efficient compact cars and the demand for its new luxury Genesis sedan helped it meet this year’s sales target.
However, it has been a tough couple of years for the group. In 2007, Hyundai fought fluctuating exchange rates and high costs in oil and raw materials. Still it managed to make and sell 2.6 million vehicles, the highest in its history. This year there are looming clouds from the protracted sales slump in America, Korea’s second-largest export market, and concerns about the possibility of a more protectionist stance from Barack Obama, America’s president-elect. While the company held onto its edge by maintaining its 3% US market share it is also looking to manage the wane in demand from developed markets by increasing its output of smaller cars and announced it will open its new manufacturing plant in the Czech Republic ahead of schedule.
Hyundai has a strong presence in the region’s most important countries. It has large manufacturing plants in India and China, the latter representing the world’s largest and fastest growing car market. Last March, Hyundai’s cumulative Indian exports broke the half-million mark while the size of the market there is forecast to nearly double to 1.62 million by 2010. Sales in emerging markets rose more than 35% in the first nine months of 2008 and next year Hyundai plans to expand exports to 110 countries.
The petroleum and associated products, plastics and synthetic fibres made in the industrial sector are vital to the myriad manufacturing plants and products that originate in Asia. While the FA100 list is dominated by companies from the north of the region, the engineering plastics produced there are as important to the low-cost labour markets of Malaysia, Thailand and Indonesia as they are to their larger neighbours in India and China.
Taiwan’s mighty Formosa Group made a clean sweep in the FA100, claiming four places for its Formosa Petrochemical, Formosa C&Fibre, Formosa Plastics and Nan Ya Plastics companies. Set up in 1958, the Formosa Group is involved in diverse interests that include oil refining and petrochemicals, as well as plastic raw materials, fibres and textiles and electronic materials.
Formosa Petrochemical is the only privately owned oil refinery in Taiwan and the country’s second largest gasoline and gasoil producer. While China is a huge market for the companies, Formosa Petrochemical has forecast declining demand. Firstly, Sinopec and PetroChina are not likely to buy more just yet, as they can start to use their stockpiles of petrol and diesel built up in advance of this year’s Beijing Olympics and, secondly, additional capacity from India’s Reliance Industries is due to come online later this year.
In line with Hyundai’s success, its auto car part maker, Hyundai Mobis and Hyundai Heavy Industries, were FA100 winners. Hyundai Mobis is the country’s largest auto parts maker, and it broke the $200 million mark this year in key parts contracts for the Chinese market.
Hyundai Heavy Industries, the world’s biggest shipbuilder, looked to diversify into the finance sector and boost earnings when it announced in May the $777 million purchase of a small local brokerage and an asset management firm from Korean conglomerate CJ Group. Hyundai Heavy joins other Korean companies, including Hyundai Motor, that have taken advantage of the government’s deregulation of the financial markets to enable them to buy securities houses and banks.
New on the FA100 list is Daewoo Engineering & Construction. Founded in 1973, Daewoo is the largest construction company in Korea. Its business interests include gas pipeline and storage tanks in Asia, Africa and the Middle East, and more than 130 domestic and international highway and bridge projects. This year the company signed an M&A agreement with Korea Express and began work on a shipyard in Oman that is due to open in 2010.
| Ranking by revenue |
| Country |
Company |
(million $) |
| SK |
Hyundai Motor |
32,817 |
| TW |
Formosa Petrochemical |
21,290 |
| SK |
Hyundai Heavy Industries |
16,719 |
| SK |
Hyundai Mobis |
9,139 |
| TW |
Formosa C&Fibre |
7,307 |
| TW |
Nan Ya Plastics |
6,962 |
| TW |
Formosa Plastics |
5,529 |
| |
|
|
| Ranking by net profit |
| Country |
Company |
|
| SK |
Hyundai Heavy Industries |
143.50% |
| TW |
Formosa Petrochemical |
54.90% |
| TW |
Formosa Plastics |
53.60% |
| TW |
Formosa C&Fibre |
0.46 |
| SK |
Hyundai Motor |
29.00% |
| TW |
Nan Ya Plastics |
23.90% |
| SK |
Hyundai Mobis |
0.13 |
| |
|
|
| Ranking by revenue growth |
| Country |
Company |
|
| TW |
Formosa Petrochemical |
32.10% |
| TW |
Formosa C&Fibre |
31.90% |
| TW |
Nan Ya Plastics |
0.26 |
| SK |
Hyundai Heavy Industries |
0.24 |
| TW |
Formosa Plastics |
23.20% |
| SK |
Hyundai Motor |
0.12 |
| SK |
Hyundai Mobis |
4.00% |
| |
|
|
| Ranking by ROE |
| Country |
Company |
|
| SK |
Hyundai Heavy Industries |
35.40% |
| TW |
Formosa Petrochemical |
29.30% |
| TW |
Nan Ya Plastics |
22.00% |
| TW |
Formosa Plastics |
21.60% |
| TW |
Formosa C&Fibre |
20.50% |
| SK |
Hyundai Mobis |
19.90% |
| SK |
Hyundai Motor |
9.80% |
| |
|
|
| Share price |
| Country |
Company |
Share price, Nov 1, 2007 |
Share price, Nov 1, 2008 |
Currency |
| TW |
Formosa C&Fibre |
85.2 |
53.8 |
TWD |
| TW |
Formosa Petrochemical |
105 |
76 |
TWD |
| TW |
Formosa Plastics |
98.8 |
55.6 |
TWD |
| SK |
Hyundai Heavy Industries |
524,000.00 |
166,500.00 |
KRW |
| SK |
Hyundai Mobis |
89,100.00 |
74,900.00 |
KRW |
| SK |
Hyundai Motor |
67,500.00 |
58,800.00 |
KRW |
| TW |
Nan Ya Plastics |
94.8 |
46 |
TWD |
