[ListCo at a Crossroads] Aluko Group② Park Dobong Family Accumulates Tens of Billions Through Internal Transactions

96% of Alutec's Revenue Comes from Aluko Group Affiliates
Higher Operating Margin than Affiliates... Listed Companies Remain 'Undervalued'

Alutec, an unlisted company wholly owned by the owner family of the Aluko Group, has reportedly accumulated substantial profits for over 20 years through large-scale internal transactions with its affiliates. Market observers point out that such internal transaction structures are cited as a factor contributing to the "Korea discount," which lowers the corporate value of listed companies.

According to the Financial Supervisory Service’s electronic disclosure system on July 23, Alutec sits at the apex of Aluko Group’s governance structure. The ownership hierarchy is Alutec → KPTU → Aluko. Aluko Group has a total of 16 affiliates, including Aluko, which is listed on KOSPI, and KPTU, which is listed on KOSDAQ.

Alutec is engaged in the business of casting aluminum alloy billets. Chairman Park Dobong of Aluko Group acquired the company in 2005. The shareholding structure is as follows: Chairman Park holds 42.4%, his spouse Oh Jungja owns 10.3%, and his children Park Sera and Park Junhee hold 8.9% and 15.7%, respectively. Including treasury shares, the Park family collectively owns 100% of Alutec.

At the time of Chairman Park's acquisition, Alutec had a capital of 1 billion won and was generating operating profit in the range of 100 million to 200 million won. Subsequently, Aluko Group expanded business with Alutec and gave it full backing. The group has adopted a model in which aluminum billets manufactured by Alutec are delivered to affiliates for further processing.

Currently, the majority of Alutec’s revenue is derived from internal transactions with its affiliates. As of the end of last year, Alutec reported revenue of 87.5 billion won. Out of this amount, 84.8 billion won in revenue—representing 96.9% of the total—came from its affiliates, including Aluko, KPTU, Hyundai Vina, ALK VINA, and HDAL Vina.

Despite generating sales mainly from affiliates, Alutec’s operating margin is higher than those of its affiliates. As of the end of last year, Alutec’s operating margin was 8.05%. In comparison, the standalone operating margins of Aluko and KPTU were 1.04% and 3.47%, respectively. Based on such profitability, Alutec has accumulated earnings for over 20 years. As of the end of last year, Alutec’s retained earnings reached 5.06 billion won—a more than 100-fold increase from 470 million won in 2006.

Aluko Group also provides financial assistance to Alutec to procure raw materials. As of the end of last year, Aluko Group affiliates had loaned a total of 44.8 billion won to Alutec, with Aluko providing 21.7 billion won, Hyundai Aluminum 20.1 billion won, and KPTU 3 billion won. Additionally, Aluko and Hyundai Aluminum provided payment guarantees for Alutec’s loans from financial institutions, amounting to 57 billion won.

Within the group's affiliates, Alumaterials is also subject to Alutec’s influence. Alumaterials serves as an intermediate holding company overseeing Aluko Group's overseas affiliates. Alutec owns a 49.5% stake in Alumaterials. Chairman Park Dobong and CEO Park Sera serve as co-representatives of the company.

All of Alumaterials’ revenue is generated from affiliate companies, including Aluko, ALK VINA, and HYUNDAI ALUMINUM VINA. Last year, its revenue was 700 million won, of which 500 million won was spent on salaries and commission fees. The company has a total of five employees, including the co-representatives.

The market identifies such internal transactions with owner family companies as one of the causes for underpricing of listed companies. During a legislative policy discussion session on July 21 hosted by the Democratic Party’s Korea Premium K-Capital Market Special Committee titled ‘Legislative Tasks for Preventing Stock Price Suppression to Resolve Korea Discount’, the practice of listed companies transferring profits through transactions with owner family firms was specifically criticized. In fact, the price-to-book ratios (PBR) for Aluko and KPTU stand at 0.44 and 0.35 times, respectively.

On this matter, a representative of Aluko Group explained, “Although Alutec’s operating margin is in the 8% range, its profitability is not that high after accounting for borrowing costs. Since Alutec’s presence allows us to source billets at lower prices than purchasing from outside companies, it is far from an act of seeking private gain on the part of the owner.”

This content was produced with the assistance of AI translation services.