The third-generation owners of major paper companies have been consistently delivering disappointing results. Although it is hard to provide a uniform explanation given that each company deals with different items, it is a common point that they could not escape the effects of the economic downturn.
According to FnGuide, a financial information firm, sales for Hansol Paper, the leading company in the paper industry, are projected to reach 2.22 trillion won in 2024, a 1.4% increase from the previous year (2.19 trillion won), but operating profit has plummeted from 47.2 billion won to 22 billion won. This trend was influenced by the operating loss of 4.3 billion won in the last quarter and an increased deficit of 12.7 billion won in the current quarter.
This period coincides with the appointment of Han Kyung-rok, the eldest son-in-law of Hansol Group Chairman Cho Dong-gil. While the main paper business shows signs of improvement, the logistics center project, in which the environmental division is participating as a contractor, has been a hindrance.
Due to the real estate market slump and worsening financial conditions, the environmental division is struggling to collect construction receivables from projects like the logistics centers in Gyeonggi's Icheon and Ansan. As a result, the company accumulated approximately 70 billion won in related bad debt provisions last year.
According to the company, the paper sector has shown signs of recovery starting in the fourth quarter, benefiting from declines in pulp prices and stabilized shipping costs, leading to a return to operating profit.
KLEANNARA, led by CEO Choi Hyun-soo, saw a reduction in losses due to the effects of rising exchange rates (decreased won value), but it could not avoid weak demand for its main products, boxboard materials, and toilet paper. Last year, the company's sales were 537.1 billion won, a 4.3% increase from the previous year (514.9 billion won), but it recorded an operating loss of 900 million won, failing to return to profitability.
An industry insider noted, "Box packaging materials like boxboard are highly affected by the economy, and exports focusing on Southeast Asia and the United States were also weak," adding, "Moreover, with the acquisition of Monalisa and KODI by Indonesia's APP, they have entered the domestic market with aggressive pricing, so it is expected to be affected."
Moorim has relatively performed well among the paper industry. When combining the results of the three Moorim affiliates (Moorim Paper, Moorim P&P, Moorim SP), last year's sales reached 2.38 trillion won, an increase of about 6%, while operating profit nearly doubled to 126.6 billion won, largely thanks to demand for U.S. exports aided by favorable exchange rates.
Above all, the fact that Moorim P&P is the only producer of pulp, which accounts for about 60% of costs, in the country has been a strong advantage. However, following a peak of $883 per ton in the second quarter of last year, the international pulp price fell to $670 in the fourth quarter, leading to assessment that the performance was weaker than expectations from the securities market.
Lee Do-kyun, the grandson of founder (late) Lee Mu-il and the eldest son of Lee Dong-wook, chairman of Moorim Group, has been concurrently serving as the CEO of Moorim Paper, Moorim P&P, and Moorim SP since 2020.
The paper industry anticipates that the economic growth forecast for 2025 will lower to 1.5% (Bank of Korea), down from last year's 2.0%, suggesting that this year will present an especially challenging management environment. While U.S. export corporations are currently benefiting from high exchange rates, the variables arising from the inauguration of the second Donald Trump administration remain a risk.
An industry insider stated, "The demand for paper, including boxes, increases only when the economy is good," adding, "A significant number of paper companies' representatives, including owners and CEOs, are under management scrutiny."