HMM CEO nominee Kim Kyung-bae

Shipping company posts record-high operating profit last year

By Park Jae-hyuk

Speculation about Hyundai Motor Group's acquisition of HMM has reemerged among investors, since a former top executive of the automotive group became the new CEO of the shipping company, which is currently being managed by creditors comprised of state-run Korea Development Bank (KDB) and the Korea Ocean Business Corp.

According to industry officials, Monday, the creditors held a meeting last Wednesday to select former Hyundai Glovis and Hyundai Wia CEO Kim Kyung-bae as the successor to incumbent HMM CEO Bae Jae-hoon, whose term will end in March. The nominee is said to take office following the forthcoming general meeting of shareholders next month.

After joining Hyundai Mobis in 1990, Kim assumed important positions at the automotive group, including secretary for late Hyundai Group founder Chung Ju-yung and his son, Hyundai Motor Group Honorary Chairman Chung Mong-koo.

He left the group in December 2020, after serving three years as Hyundai Wia's CEO and working for a decade as the chief executive of Hyundai Glovis. He was recognized for enabling Hyundai Glovis to become the nation's leading logistics company through the diversification of its businesses.

Considering his career and close relationship with Hyundai Motor Group, the nomination of Kim as the new head of HMM is viewed by some investors as the creditors' resumed efforts to sell their controlling stakes in the shipping company to Hyundai Glovis.

In 2016, KDB asked Hyundai Glovis to acquire HMM, but Hyundai Motor Group refused to accept the offer, citing the irrelevance of Hyundai Glovis to HMM in terms of their areas of business. Hyundai Glovis ships and transports automobiles, while HMM is a container carrier. Until now, the automotive group has dismissed speculation about its acquisition of the shipping company.

The KDB has reiterated its intention to gradually sell part of its stake in HMM, although Minister of Oceans and Fisheries Moon Seong-hyeok told reporters last December that it is too early to talk about a sale.

"Because HMM has become very profitable recently, it seems that we should divest from the company," KDB Chairman Lee Dong-gull said in a press conference last November.

Cargo being loaded onto an HMM container ship anchored in the Port of Rotterdam in this file photo. Courtesy of HMM

HMM announced Monday that its 2021 operating profit rose 652 percent year-on-year to a record 7.37 trillion won ($6.15 billion) and its annual sales reached 13.7 trillion won last year, up 115 percent from 2020. Among Korean companies that have announced their 2021 earnings, HMM posted the fourth-largest annual operating profit last year, following Samsung Electronics, SK hynix and POSCO.

"Our operating profit last year offset operating losses we had suffered for nine years between 2011 and 2019," HMM said in a press release. "Our debt-to-equity ratio, which reached 2,000 percent in 2015, dropped to 73 percent last year."

Its market cap also rose to 12.2 trillion won, as the record earnings raised its stock price by 2.67 percent during Monday's trading session.

If Hyundai Glovis takes over the profitable shipping company, the acquisition is expected to raise the valuation of the logistics firm, enabling its largest shareholder, Hyundai Motor Group Chairman Chung Euisun, to secure cash for the group's governance reform. In addition, Hyundai Motor Group will also be able to regain the legacy of its late founder from the government, if Hyundai Glovis acquires HMM, which was previously called Hyundai Merchant Marine.

Both HMM and Hyundai Glovis, however, declined to comment on the recent speculation about the potential acquisition deal.