As Kiturami Holdings, a heating and cooling specialist, moves to pay large-scale dividends totaling 362 billion won, some in business circles say the succession of management rights from founder Chair Choi Jin-min to his two sons is entering full swing.
Because Chair Choi and his two sons and other family members hold more than half of Kiturami Holdings' equity, the view is that these dividends are aimed at securing funds needed for the succession process.
◇ Ultra-high dividends for owner family signal second-generation succession
Kiturami Holdings disclosed on Apr. 10 that it decided to pay a total of 362.7 billion won in dividends, using retained earnings on a consolidation basis for last year. Net profit was 29.8 billion won, putting the payout ratio at about 1,217%. That means the company paid shareholders more than 12 times the net profit it earned last year.
The market views the size of these dividends as unusual. The last time Kiturami Holdings paid dividends was in 2022, when the total payout was about 16.8 billion won. In three years, the dividend scale has surged more than 20-fold. Beyond simple shareholder returns, given that the owner family holds more than half of Kiturami Holdings' equity, there is growing belief that these dividends are tied to a second-generation succession framework.
Kiturami Holdings is unlisted and its exact equity structure is not disclosed, but the industry understands that Chair Choi Jin-min, with an equity stake in the 30% range, is the largest shareholder. His eldest son, Kiturami Energy CEO Choi Seong-hwan, is said to hold a stake in the 10% range, and his second son, Nanochem CEO Choi Yeong-hwan, around 8%.
Chair Choi's spouse, Dr. Robin CEO Kim Mi-hye, reportedly holds a stake in the 5% range, and the youngest daughter, Dr. Robin Executive Director Choi Mun-gyeong, around 6%. Combined, the owner family's equity exceeds half. This is why some say the hefty dividends will, in effect, concentrate cash in the owner family.
Born in 1941, Chair Choi currently oversees the group's overall management. He serves as CEO of Kiturami Holdings. Given his advanced age, the industry sees a strong likelihood that a succession framework will take shape in earnest.
Kiturami Holdings controls boiler maker Kiturami; boiler parts manufacturer Nanochem; three refrigeration and air-conditioning firms—Kiturami Bumyang Air-conditioning, Century, and Shinsung Engineering; city gas company Kiturami Energy; golf course operator Kiturami Land; and restaurant company Dr. Robin.
◇ Possible reshuffle of roles between eldest and second sons… task of expanding overseas business
Eldest son CEO Choi Seong-hwan manages Kiturami Energy and Kiturami Land. Kiturami Energy supplies city gas to parts of Guro, Geumcheon, and Yangcheon districts in Seoul, and Kiturami Land operates Hantan River Country Club in Cheorwon, Gangwon Province. Second son CEO Choi Yeong-hwan leads boiler parts manufacturer Nanochem. Nanochem produces core boiler components such as pumps and motors and supplies them to Kiturami affiliates.
However, the group's mainstay boiler and refrigeration and air-conditioning businesses are run by professional managers. Attention is focused on which of the two sons will take charge of the group's core manufacturing operations, or whether their roles will be reshuffled.
The roles of Chair Choi's daughters are seen as relatively distinct by business area.
Eldest daughter Choi Su-young serves as a department head at Kiturami Land and is involved in the golf course business. The second daughter lives in the United States and is said not to be involved in group management. Youngest daughter Executive Director Choi Mun-gyeong is involved in management at the dining brand Dr. Robin, which sells pasta, risotto, and pizza, alongside her mother, CEO Kim Mi-hye.
A decline in Kiturami Group's overall performance is also an issue. Kiturami Holdings posted 1.2101 trillion won in sales and 45.8 billion won in operating profit last year on a consolidation basis. Compared with the previous year, sales fell 3.2% and operating profit dropped 7.6%.
In particular, profitability worsened at the three refrigeration and air-conditioning companies—Kiturami Bumyang Air-conditioning, Century, and Shinsung Engineering. Because Kiturami Group relies heavily on the domestic market, the industry says it needs to expand overseas operations and improve profitability. Exports currently account for about 20% of total group sales. Kiturami Group plans to raise that to the 50% range by 2030.
Dr. Robin also needs to improve profitability. Dr. Robin posted an operating loss of 2.1 billion won last year. In February, the company registered its franchise disclosure with the Korea Fair Trade Commission and moved to expand its franchise business. The move is seen as a strategy to improve results by switching to a franchise model.