Orion receives first dividend from Chinese subsidiary

Orion Choco Pie being sold at a supermarket in China. [Courtesy of Orion]

Orion received its first-ever dividend from its Chinese subsidiary since it began its Chinese operations in 1995. The company has actively pursued dividends from its overseas subsidiaries, benefiting from government tax incentives introduced in 2023 under the “capital reshoring” policy that encourages the inflow of overseas corporate funds into South Korea.

According to Orion’s semi-annual report, released on Monday, its Chinese subsidiary, Pan Orion Corporation, paid a dividend of 133.4 billion won to Orion on June 30th, 2024. This is the first time a Korean food company has received a dividend from a Chinese subsidiary, with Orion also receiving its first dividend from its Vietnamese subsidiary in 2023, with the total expected dividend from Vietnam totaling 103.8 billion won this year.

Orion plans to use the dividends repatriated from its overseas subsidiaries for domestic investments, with the company set to build an integrated center in Jincheon, North Chungcheong Province. The center combines a production facility, packaging factory, and logistics center on a 191,736 square-meter site, with construction expected to begin in 2024.

Orion also aims to increase its domestic dividend payout using the dividends from its overseas subsidiaries. Orion’s stock trended downwards in January 2024 after the company invested about 550 billion won through its Chinese subsidiary to acquire LigaChem Biosciences, a developer of antibody-drug conjugates (ADCs).

Orion announced in February that it would raise its dividend payout ratio to over 20 percent of consolidated net profit and is expected to implement aggressive shareholder return policies using its overseas dividend income. The company emphasized that both its Chinese and Vietnamese subsidiaries have sufficient funds to invest without needing additional borrowing and still have the capacity to pay dividends.

Orion’s Chinese subsidiary reported sales of 1.17 trillion won in 2023, with an operating profit of 221 billion won and an operating profit margin of 18.7 percent. Orion began its full-scale entry into the Chinese market by establishing a local production base in Langfang, Hebei Province, near Beijing, in 1997, two years after its Chinese subsidiary was founded.