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Photo courtesy of Yonhap News |
[Alpha Biz= Kim Jisun] Company to pursue 2-for-1 capital reduction and 5-for-1 stock split while reviewing AI data center investments
Dongkuk Holdings announced on Feb. 11 that it posted consolidated operating profit of KRW 39.5 billion for the previous fiscal year, down 32.0% year-on-year.
Revenue declined 0.7% to KRW 1.9853 trillion over the same period, while net profit fell 23.2% to KRW 15.1 billion.
The company attributed the earnings decline to equity-method losses from affiliates amid a downturn in the steel market.
Separately, Dongkuk Holdings’ board of directors resolved to cancel 698,940 treasury shares, representing 2.2% of total outstanding shares. The record date is April 27, with the cancellation to take effect on April 28.
To improve its capital structure from a mid- to long-term perspective, the company also plans to implement a 2-for-1 capital reduction without consideration alongside a 5-for-1 stock split. Following approval at the regular shareholders’ meeting scheduled for late March, the company aims to complete relisting by the end of May.
While capital reductions are typically viewed negatively, Dongkuk Holdings explained that the move differs from those of financially distressed companies. The objective is to expand distributable profits by lowering the proportion of paid-in capital. Under the Commercial Act, distributable earnings are calculated by excluding capital from net assets.
Upon completion of the restructuring, the proportion of capital to net assets is expected to decline from 41.1% (KRW 271.1 billion) at the end of last year to 11.8% (KRW 77.8 billion).
“This means that approximately KRW 200 billion previously tied to the capital account can now be utilized more efficiently,” the company said, adding that the capital reduction will not affect total shareholders’ equity and therefore will not change the company’s intrinsic value.
Because the capital reduction does not reduce the number of shares held by shareholders, individual investors’ shareholdings will remain unchanged. Trading will resume at the same closing price as the day before the trading suspension.
Although the restructuring involves a reallocation of capital without changes to total equity, the company said it will proceed with the 5-for-1 stock split to mitigate potential stock price volatility. By increasing the number of shares outstanding, the split aims to lower psychological entry barriers for retail investors and encourage broader participation.
As a result of the capital restructuring, Dongkuk Holdings stated that it will have to postpone dividend payments for one year. However, it raised the minimum dividend threshold from KRW 300 to KRW 400 per share (KRW 80 post-split), signaling an intention to expand future dividend payouts.
Meanwhile, Dongkuk Holdings is reviewing potential investments in AI data centers as part of its future growth strategy, leveraging group assets such as factory sites and power infrastructure amid growing market interest in artificial intelligence-related facilities.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
