STX Eyes Energy Exploration
Chairman Kang Duk-soo of STX Group to focus on energy and cruiser shipbuilding with Aker Yards
Chairman Kang Duk-soo said during an interview with the media recently that this is the age of energy and the exploration of new sources of energy is crucial. The group has been engaged in energy exploration projects and is considering launching projects in a number of countries around the world including Nigeria, Azerbaijan, Madagascar and Uzbekistan.
The group now plans to directly engage in energy exploration in joint ventures with such oil majors as British Petroleum, and not just in energy funds.
The group has been expanding its natural resources exploration projects from oil to gas, coal and zinc with offshore equipment developed and produced by its affiliates, as well as taking care of the logistics end of the business. The group plans to build a business value chain dealing with both the upstream and downstream sides.
STX also plans to expand its operations in Indonesia to shipping and construction from energy exploration, as the group is ready to take on any other promising areas if opportunities open up.
Regarding M&As, the chairman said he will consider more of them to secure the updated technologies that the group needs, but not just for the sake of beefing up its scale. He regards M&As as a normal part of business to supplement the less-competitive areas for the creation of synergy and to speed up business growth.
On the chances of securing the final clearance from the EU on its takeover of Aker Yards, a Norwegian cruise ship builder, Kang said he doesn't expect any problems in getting the approval on May 15 when the EU committee takes up the issue. In fact, the EU ok's the deal for STX on May 5 and STX has become the first Korean shipyard to venture into cruiser shipbuilding.
But he added that the U.S and EU are far more protective of their markets and industries than he previously thought they were.
The EU is very sensitive about the impact of a foreign firm's takeover of a European firm on other companies in the market. It's the same with Aker Yards, but Kang said the EU would approve the deal.
Kang also called on the government to give regulatory support to domestic companies so that they can fend off hostile takeover attempts by foreign firms operating in the country. Foreign companies are free to do business in Korea because the government wants to expand foreign investment in the country, the chairman said.
The government should also give support to domestic companies operating overseas in such a way as to enhance their competitiveness.
The idea of a domestic market will disappear if free trade agreements are concluded with many countries, most notably the U.S., Japan and China.
Kang also said he might scrap the plan to build a shipbuilding parts and materials plant near Masan due to opposition by citizens of the coastal city. He could have decided to build the projected plant elsewhere such as Pohang, Namhae or the Daebul Industrial Complex near Kunsan, but the group signed an MOU with the city because of its enormous desire to bring STX's new plant to an industrial complex near the city.
Kang said speed is a key to success for the firm, pointing to the Dairen shipyard, which was completed in a year and is already building ships.
The chairman has big ambitions for the group. He envisions its total annual sales will reach 50 trillion won by 2012 from 12 trillion won last year, a jump of 150 percent in just five years.
To meet the target, Kang is looking overseas where a large part of business is to be secured, which is not unusual since STX got about 90 percent of its business from abroad because of the limited nature of the domestic market.
The group initially projected its annual sales would reach 20 trillion won in 2010 with operating profit of 1 trillion won, but it appears that the target will be achieved this year. STX Pan Ocean expected to realize sales of $8.3 billion this year, but the shipping affiliate of the group has already made 2.6 trillion won in sales in Q1. The shipbuilding and machinery sectors expect to record $15 billion in sales this year. They don't expect the $50-billion-by-2012 target for the group to be much trouble.
The group, launched in 2001 with Ssangyong Heavy Industry as its mother company, is now ranked the 12th largest in the country. nw
A view of STX Shipyard.
Chairman Kang Duk-soo of STX Group.