As major trading companies accelerate efforts to secure resource assets like mines and gas fields, Hyundai Corporation is taking a different path. Instead of focusing on resource development, the company is channeling funds into the manufacturing value chain, particularly in automotive and robotics components. This marks a shift from acquiring 'resources' to investing in 'parts.'
According to Hyundai Corporation's business report on September 23, revenue from resource development plummeted from 38.35 billion won in 2023 to 23.91 billion won in 2024, and it completely disappeared last year. The first quarter of this year also recorded zero revenue, effectively erasing its contribution, which was just 0.1% of total sales in 2023.
The trend is mirrored in the company's asset holdings. Investment in resource development fell by 42.6%, from 149.42 billion won at the end of 2024 to 85.79 billion won at the end of last year. In October 2024, Hyundai completed the sale of its stake in the Vietnam 11-2 oil field. Earnings from equity method investments and dividends also shrank from 31.09 billion won to 9.64 billion won. The remaining key assets include LNG projects in Yemen, Oman, and Qatar.
In contrast, parts manufacturing is filling the gap. Last year, Hyundai acquired a 77.6% stake in Sigma, an automotive interior parts manufacturer, for 52.3 billion won, marking its first foray into manufacturing since its founding in 1976. This month, the company invested 8.1 billion won in Robortus, a firm specializing in torque sensors for robotic automation. The total investment in these two ventures amounts to 60.4 billion won.
Changes are also evident in Hyundai's existing portfolio. Revenue from the energy and utility parts sector, which includes transformers, electrical equipment, and automotive aftermarket parts, increased from 509.2 billion won in 2024 to 574.2 billion won last year, with its share of total sales rising to 7.9% in the first quarter of this year. The company reported a record operating profit of 62.9 billion won in the second quarter, driven by mobility, North American transformers, and petrochemicals, with resource development not mentioned.
This strategy contrasts sharply with other trading companies. Posco International reported an operating profit of 226.4 billion won in its energy sector in the second quarter, accounting for more than half of its total profit, and recently signed a contract to acquire U.S. Marcellus shale gas assets for $550 million, expecting annual profits of around 100 billion won starting in 2028. LX International also saw resource sector revenue rise to 364.9 billion won in the second quarter, with an operating profit of 21.6 billion won, an increase of 12.9 billion won from the previous year, largely driven by its Indonesian AKP nickel mine. The company is pursuing additional nickel mine acquisitions and promising mineral resources like bauxite.
However, Hyundai Corporation is not completely abandoning resource development. It retains stakes in LNG projects in Oman and Qatar, and the decline in investment is influenced by accounting factors such as the depreciation of Yemen's LNG value and the establishment of loss provisions, making it difficult to view all reductions as strategic divestments.
Nonetheless, the direction of new funding is clearly shifting. In 2021, Hyundai removed 'general trading company' from its name, redefining itself as an investment firm focused on discovering and nurturing new businesses. While traditional trading companies secure underground resources for trading, Hyundai is leveraging its sales networks in finished vehicles and electrical equipment to connect back to parts manufacturing.
However, this transition is not expected to yield immediate results. Sigma has been integrated for just over a year, and Robortus reported sales of 1.88 billion won last year with an operating loss of 1.04 billion won, indicating it is still in the early stages of growth. An industry insider noted, "Resource development requires massive capital and long payback periods, making it challenging for mid-sized trading companies to compete in the same way. It is more realistic to move upstream from manufacturing parts in automotive or electrical equipment where they already have established sales networks."
* This article has been translated by AI.
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