Hyundai Infracore’s cumulative operating profit tops acquisition cost in 2 years

[Courtesy of HD Hyundai Infracore]

HD Hyundai Infracore Co., formerly known as Doosan Infracore before being acquired by South Korea’s HD Hyundai Co. two years ago, has generated an operating profit topping HD Hyundai’s acquisition cost amid the slowing Chinese real estate market, which was previously the company’s biggest market.

HD Hyundai Infracore said Wednesday that it posted sales of 1.08 trillion won ($794.83 million), an operating profit of 89.7 billion won in the third quarter of 2023. Its cumulative operating profit since becoming an affiliate of HD Hyundai hit 774.1 billion won, after recording a 37.3 billion won figure from August to December 2021, 332.5 billion won in 2022, and 404.3 billion won in the first three quarters of 2023.

HD Hyundai acquired a 29.94 percent stake in HD Hyundai Infracore from Doosan Enerbility Co., formerly known as Doosan Heavy Industries & Construction Co., and obtained managerial control over Hyundai Infracore in August 2021. HD Hyundai XiteSolution Co., formerly Hyundai Genuine Co., signed the agreement for the acquisition, and the transaction value was 850 billion won. HD Hyundai XiteSolution is the intermediate holding company for HD Hyundai’s construction equipment business.

But the amount that HD Hyundai XiteSolution actually paid to Doosan Heavy Industries & Construction was lower at 690.8 billion won, as the latter paid 67.7 billion won for the settlement of the stock sale, including corporate taxes, and 91.5 billion won for the cost of acquiring a stake in Doosan Infracore China Co (DICC).

With these figures, HD Hyundai Infracore earned a cumulative operating profit of 774.1 billion won that tops its acquisition cost of 690.8 billion won just two years after the acquisition. HD Hyundai’s construction equipment division has also grown into a core business accounting for half of the group’s total operating profit and become HD Hyundai Infracore’s next solid growth engine after shipbuilding.

The company’s prospects are even brighter given the sluggish Chinese real estate market. At the time of the sale, China accounted for 29 percent of HD Hyundai Infracore’s construction equipment sales in 2021, the highest in the world. In the third quarter of 2023, however, the company managed to significantly reduce its dependency on China to 7 percent as its effort for advancing into new markets such as the United States and emerging economies paid off, and the company is expected to further improve its performance when the construction sector in China rebounds.

Meanwhile, HD Hyundai Construction Equipment Co., the other unit in HD Hyundai’s construction equipment division, posted sales of 928.7 billion won and an operating profit of 53.8 billion won in the third quarter. Sales were up 6.2 percent from a year ago, but operating profit fell 14.6 percent.