Major corporations in South Korea make significant facility investments in an effort to boost their company value amidst challenging economic times and find new sources of growth.

A total of 53.37 trillion won ($39.4 billion) in facility investment and asset purchases from January 1 through April 7 in 2024 was announced through public disclosures by 37 large companies, including SK Hynix Inc., Hyundai Motor Co., LG Electronics Inc., Korean Air Lines Co., Hyundai Steel Co., and Lotte Shopping Co., according to the Financial Supervisory Service on Monday.

The value of the investment is twice as much as the 26.5 trillion won that 28 corporations reported for the same time frame.

Prior to or on schedule for their annual shareholders’ meetings, the majority of Korean businesses reveal their full-year investment intentions.

According to government data, the majority of investments have gone into developing future growth industries, such as eco-friendly materials, rechargeable batteries, and high bandwidth memory (HBM) chips.

With its statement last month that it would spend 18.47 trillion won to purchase 33 Airbus A350 aircraft, Korean Air topped the list.

Hyundai Mobis Co., 3.18 trillion won, Hyundai Steel, 2.05 trillion won, SK Hynix, 5.2 trillion won, LG Electronics, 4.38 trillion won, Kia Corp., 3.32 trillion won, Hyundai Motor, 2.05 trillion won, EcoPro Materials Co., 957.3 billion won, and NCSOFT Corp., 580 billion won were the next in line.

IDEAS TO IMPROVE COMPANY VALUE

According to analysts, corporations are making significant investments in order to increase their corporate value in the long run, as the business environment becomes more unfavorable and investor demands for larger dividends and share cancellations to increase shareholder value increase.

A total of 615 businesses listed on the main exchange, excluding those in the banking sector, reported an operational profit of 123.83 trillion won in 2023, down 24.6% from the year before, which indicates less money available for reinvestments, according to the Korea Exchange.

The second-largest memory chip manufacturer in the world, SK Hynix, announced last week that it would invest $3.87 billion to construct its first overseas HBM chip production, advanced packaging, and R&D facilities for artificial intelligence chips in Arizona, US.

The two biggest automakers in Korea, Hyundai Motor and Kia, intend to invest a total of 15.84 trillion won this year in the construction of facilities for next-generation cars, including purpose-built vehicles (PBVs). The investment plan represents a 10.7% increase over the previous year, or 1.53 trillion won.

Manufacturers of battery materials are among the businesses planning large investments.

In addition to EcoPro Materials, Daejoo Electronic Materials Co., a manufacturer of electric vehicle parts, and Eco & Dream Co., a producer of automotive catalysts, intend to invest 180 billion won and 19.1 billion won, respectively, in battery materials facilities.

A new camera module plant will be constructed for 383 billion won, according to a regulatory filing by camera module supplier LG Innotek Co.

POLICY: SHAREHOLDER-FRIENDLY

In addition to making significant investments to guarantee the foundation of their future engines of growth, businesses also take steps to increase shareholder value.

The second-biggest carmaker in Korea, Kia, said that it is raising dividend payments overall this year by 60% to 2.19 trillion won, or 5,600 won per ordinary share.

Hyundai Mobis has chosen to retire 660,000 shares from the market and increased dividends this year by 12.5% to 4,500 won per share. The number of shares cancelled has increased by 30,000 during the previous year.