POSCO International to Divest Uzbekistan Spinning Operations in Strategic Shift
POSCO International plans to divest its Uzbekistan spinning operations, which have been suffering losses for three consecutive years, as part of a broader restructuring strategy. The venture aims to liquidate 125 non-core assets to raise 2.1 trillion won in cash. Future efforts will focus on enhancing investments in the energy sector, showcasing a strategic pivot from traditional spinning activities.
POSCO International has announced its intention to divest from its spinning operations in Uzbekistan, a business that has been operational for nearly 30 years. This move is part of a comprehensive restructuring initiative led by Chairman Chang In-hwa, which aims to liquidate 125 low-profit and non-core assets to generate 2.1 trillion won in cash. The Uzbekistan division has been unprofitable for three years, with losses totaling 29.2 billion won in 2023 amid declining sales which reached 53.4 billion won.
The Uzbekistan spinning operations originated in the early 1990s when Daewoo Group entered the local market, forming a corporation for car exports after signing a Memorandum of Understanding with the government in 1992. By 1996, Daewoo Corp., the predecessor of POSCO International, had expanded into the spinning industry. The enterprise endured after the Daewoo Group dissolved, further acquiring the Fergana and Bukhara spinning companies in the mid-2000s.
Nonetheless, the global economic downturn and surplus cotton supplies have severely impacted the performance of the Uzbekistan spinning corporation. The challenges intensified in 2023 as global cotton market conditions shifted, notably due to Brazil becoming the largest cotton exporter and reduced demand from key markets such as China.
A representative from POSCO International indicated, “We are pursuing management normalization by selling some of the factories of the Uzbekistan spinning corporation.” However, the spokesperson also clarified that this does not indicate a total withdrawal from the spinning market in the region, suggesting the possibility of future engagements.
This strategic decision aligns with POSCO International’s focus on expanding its energy sector as a significant future growth area. Last year, the company reported consolidated sales of 32.341 trillion won and an operating profit of 1.117 trillion won. Moving forward, it plans to invest 3.2 trillion won in its energy initiatives over the next three years, reflecting this shift in focus.
Recent investments, including a 300 billion won increase in production at Senex Energy’s gas field in Australia and expansion efforts at the Gwangyang LNG terminal, underscore this new strategic direction. The ongoing restructuring is part of POSCO Group’s broader plan to secure 1.5 trillion won in cash through further reorganization of 61 businesses this year, which includes the liquidation of POSCO CNG Nickel Solution and the sale of POSCO Future M’s low-value-added cathode material plant in Gumi, North Gyeongsang Province.
In conclusion, POSCO International’s decision to divest from its spinning operations in Uzbekistan reflects a larger restructuring strategy aimed at improving profitability and streamlining operations. This focus on divestment and shift toward energy investments aligns with market trends while addressing challenges faced in the existing spinning sector. The company’s commitment to restructuring indicates potential for growth in its energy initiatives moving forward.
Original Source: www.businesskorea.co.kr
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