Hyosung's One-Engine Problem: Heavy Industries Soars While Textiles and Chemicals Drag

[Korea Financial Times, Gwak Horyung] Hyosung Group achieved meaningful results with two consecutive years of performance improvement, driven by the dominant run of Hyosung Heavy Industries. However, the delayed recovery of the group's traditional cash cows — textiles and chemicals — is deepening the concerns of Chairman Cho Hyun-joon.

Heavy Industries Rides the AI Wave

Hyosung, the holding company of Hyosung Group, posted consolidated revenue of KRW 2.4317 trillion and operating profit of KRW 393 billion in 2025. Revenue and operating profit rose 7% and 77.7%, respectively, year-on-year. The group has now achieved two consecutive years of performance improvement since bottoming out in 2023, following a one-time surge driven by COVID-era demand in 2021.


The driving force behind Hyosung's upward trajectory is Hyosung Heavy Industries. Last year, Hyosung Heavy Industries recorded operating profit of KRW 747 billion, more than doubling (up 106%) from the prior year. The company's early and aggressive investment in expanding ultra-high-voltage transformer manufacturing capacity in the United States beginning in 2020 proved prescient, aligning with a surge in power demand fueled by artificial intelligence (AI) data center construction and generating large-scale orders. The securities industry has raised the possibility that Hyosung Heavy Industries could surpass KRW 1 trillion in operating profit this year, as the proportion of its U.S. business continues to expand.

T&C: Hopes for Oversupply Resolution

The persistent underperformance of the textile and chemical subsidiaries, however, remains a source of concern.

Hyosung TNC, whose core product is spandex — a segment in which it holds a 30% global market share and ranks first worldwide — reported operating profit of KRW 251.5 billion last year, down 7.1% from the prior year. Net profit fell 79.2% over the same period to KRW 38.2 billion. The financial strain is attributed to the large-scale acquisition financing raised to acquire Hyosung Chemical's specialty gas division (Hyosung Neokem), which has been accumulating losses.

On a positive note, expectations for Hyosung TNC's performance are growing this year amid improving sentiment in the spandex market. According to industry sources, Huahai, China's third-largest spandex producer, filed for bankruptcy at a local court last month. Analysts note that expectations for easing supply pressure are driving selling price increases. Reflecting these developments, Hyosung TNC's share price has surged 79.7% so far this year.


Hyosung Chemical posted an operating loss of KRW 160.5 billion last year, narrowing its deficit by approximately 8% year-on-year. However, prospects for a recovery remain subdued, as the company recorded an operating loss of KRW 73.3 billion in the fourth quarter alone. While the company averted the risk of capital impairment through various asset divestitures last year, its net debt-to-equity ratio stood at 235.5% at year-end, indicating that its financial burden remains excessive.

Dividends That Cannot Be Paused Despite Deteriorating Profitability

Hyosung, Hyosung TNC, Hyosung Heavy Industries, and Hyosung Chemical have yet to resolve their dividend proposals for fiscal year 2025.

Hyosung, Hyosung Heavy Industries, and Hyosung Chemical do not have separate dividend policies. Hyosung TNC is the only entity that has committed to a policy of "reviewing dividends of 20% or more of net profit," but last year's poor earnings make it difficult to expect a meaningful payout under that criterion.

Nevertheless, there is a prevailing view that the group will maintain a high-dividend policy — excluding Hyosung Chemical, which has suspended dividends due to its losses. The rationale is that Chairman Cho Hyun-joon, who inherited the estate of Honorary Chairman Cho Suk-rai in 2024, will need to secure funding for inheritance tax obligations. Chairman Cho directly holds stakes of 41.02% in Hyosung, 20.73% in Hyosung TNC, and 10% in Hyosung Heavy Industries. He can also benefit from dividends through Hyosung's holdings of 20.78% in Hyosung TNC and 32.47% in Hyosung Heavy Industries.

The dividend decision at Hyosung Heavy Industries is of particular significance, given its strong earnings momentum. Hyosung Heavy Industries, which paid its first-ever dividend in 2023, has been on an upward trajectory, roughly doubling its total dividend payout from KRW 23.3 billion in 2023 to KRW 46.6 billion in 2024.

In the case of Hyosung TNC, the company has distributed KRW 43.2 billion in dividends annually for the past three consecutive years, regardless of its financial performance. If the same dividend amount is maintained in 2025, the payout ratio would reach 113%, far exceeding the company's own stated threshold of 20%.



Gwak Horyung (horr@fntimes.com)