UNID, the core affiliate of the chemistry-specialized corporate group OCI Group, has decided to liquidate part of its China subsidiary. Though it pursued aggressive overseas facility investments under a governance structure centered on the Oner family, it has faced shifts in China's environmental policy. Analysts say this could become a variable for its mid- to long-term growth strategy.
According to the electronic disclosure system on the 13th, UNID resolved in Sep. last year to begin liquidation procedures for UNID Sichuan New Materials Co., Ltd. in China.
The Sichuan subsidiary, for which investment was decided in 2020, sought to produce and sell caustic potash, an alkaline chemical used in batteries, detergents and semiconductor processes. However, due to the impact of a newly enacted local environmental ordinance in 2022, the investment was canceled, and the company has been proceeding with liquidation since last year.
UNID is controlled by Chair Lee Hwa-young's family, the third son of the late Honorary Chair Lee Hoe-rim, founder of Dongyang Chemical Industry (OCI Group). UNID's largest shareholder is UNID Global Trading, which holds 25.06% equity; Chair Lee and his eldest son, Vice Chair and CEO Lee Woo-il of UNID, hold 64.29% and 35.71% equity, respectively. In addition to UNID Global Trading, Chair Lee also holds 9.34% equity in UNID, giving the Oner family firm control.
The succession structure to the third generation has also been formalized. Since 2023, the company has been run under Vice Chair Lee's third-generation management system. Born in 1981, Vice Chair Lee joined UNID in 2011 and rose to vice chair after serving as deputy head (senior managing director) of the Ulsan plant, the domestic production base, and as executive managing director heading the Strategy and Planning Division.
UNID, leveraging its strong governance, focused early on its China business. It established subsidiaries in Jiangsu, China, in 2002 and 2008, respectively. Starting in 2020, it set up the Sichuan new materials subsidiary as well as a Shanghai corporate management subsidiary and a Hubei new materials-related subsidiary. There, it produces and sells caustic potash and other products. Last year, it posted sales of 3.77 billion yuan in China, about 710 billion won. That was about half of UNID's 1.3387 trillion won in sales on a consolidation basis last year.
The problem is that China sales, on which it has high dependence, could be affected by changes in the policy environment.
The liquidation of the UNID Sichuan New Materials Co., Ltd. is a clear example. Local governments in China can set separate regional environmental standards for the chemical industry. China implemented the Yangtze River Protection Law in 2021, strengthening siting regulations for chemical plants, and is also pushing policies to relocate chemical plants from general areas to industrial complexes, reflecting a trend of tighter environmental regulations.
The market views this subsidiary liquidation as the materialization of policy risks that emerged during the expansion of the China business.
As of the end of 2024, the assets of the Sichuan subsidiary under liquidation total about 4.1 billion won, which is not large compared to UNID's total assets of about 1.5 trillion won on a consolidation basis. However, as investment plans were halted due to local environmental regulations and other policy changes, uncertainties in the China-centered business structure have come to light.
Vice Chair Lee, a third-generation member of the group, is likely to be assessed on how the policy risk is managed. Since 2021, UNID has surpassed 1 trillion won in annual sales, maintaining stable top-line growth. On a consolidation basis last year, operating profit was 87.9 billion won. Given the high proportion of the China business, analysts say changes in the local policy environment will affect future growth.
A corporate advisory attorney said, "UNID is also noteworthy from a governance perspective, as equity succession of management rights to the third generation has not yet occurred."
The attorney added, "For the third-generation Oner to secure control, additional equity purchases may be necessary, and in the process, financial policies such as dividends could be affected to raise funds."