Daewoo International to Expand Resources Business as Prices Rise, Lee Says
Daewoo International Corp. (047050), the trading company controlled by South Korean steelmaker Posco, plans to double the share of revenue it gets from the resources business as it expands into copper, rice and rare earths.
The mineral and energy resources division may account for 30 percent of sales by 2015 from about 15 percent now, Chief Executive Lee Dong Hee, 61, said yesterday in an interview at the company’s headquarters in Seoul.
Rising prices of raw materials are spurring Daewoo and its South Korean peers to boost investments in commodities ranging from oil and gas to copper, competing with rivals in China and India to secure supplies. The benchmark Standard & Poor’s GSCI Index of 24 commodities has jumped 33 percent in the past year.
“We have to invest in natural resources,” said Lee. “Prices of natural resources have gone up and I don’t think they will come down again.”
Daewoo, which mostly buys and sells steel, metals and auto parts, also operates a gas project in Myanmar and owns a stake in a nickel mine in Madagascar.
The gas project in Myanmar, formerly known as Burma, is set to begin production in May 2013 and will generate $700 million in sales a year, Lee said. “It will contribute to our profit considerably,” he said.
Daewoo will probably report a profit of $200 million on sales of $18 billion this year, Lee said. Its shares have advanced 19 percent in the past year, compared with a 22 percent advance in the local benchmark Kospi index. (KOSPI) The stock rose 0.7 percent to 36,950 won at 11:26 a.m. Seoul time, heading for the highest price since June 7.
The company and partner Taejoo Synthesis Steel Co. may sign an initial agreement with Societe de Developpement Industriel et Minier du Congo or SODIMICO, to develop a copper mine in the Democratic Republic of Congo, Lee said.
Daewoo International, the biggest rice trader in South Korea, last month set up a venture with a company in Cambodia to produce rice, said Lee, who was earlier the chief financial officer of Posco. (005490) It acquired a stake in PT Bio Inti Agrindo to produce palm oil in Indonesia, a company filing showed in April.
The company aims to invest about $800 million annually for the resources division for existing and new projects, he said, without giving comparative figures or a time span.
The Myanmar gas project is expected to cost $1.7 billion, of which $1.2 billion has been secured, Lee said. The company may raise the remaining amount by selling corporate bonds or its 24 percent stake in Kyobo Life Insurance Co., he said. The timing of the sale will depend on market conditions, Lee said.