Hankuk Carbon, which completed its 'third-generation succession' work, is achieving solid results due to the increasing demand for liquefied natural gas (LNG) carriers. However, the fact that the third generation, who rose to executive positions in their 20s and became the largest shareholders in their 30s, must prove their management abilities to the market and stakeholders remains a homework assignment.
◇Dispute over management philosophy... Hankuk Carbon's chairman Jo Moon-soo
Hankuk Carbon is a composite materials corporation established in 1984. It was founded by Chairman Jo Yong-jun, who developed domestic composite materials such as fiberglass through self-study and founded Korea Fibra in Miryang in 1972. The company has supplied products to various industrial sectors including LNG carrier thermal insulation, aviation, railways, and defense components. It focuses on producing thermal insulation panels, a key component for LNG carriers.
Initially, Chairman Jo Yong-jun designated his eldest son, Jo Moon-soo, as his successor. However, due to differences in management perspectives that deepened tensions, Jo Yong-jun demanded that Jo Moon-soo step down from his position as CEO of Korea Fibra, Korea New Materials, and Hankuk Carbon in October 2009. Jo Moon-soo's resistance led to a family management rights dispute.
The management rights dispute led to a legal battle. The court proposed a separation plan where Korea Fibra would be under Jo Yong-jun’s side, while Hankuk Carbon would be under Jo Moon-soo’s side. The two accepted this, leading to Hankuk Carbon's independence from Korea Fibra in 2012. Afterward, the management rights dispute was settled when Jo Yong-jun sold all of his shares in Hankuk Carbon.
◇Hankuk Carbon completes third-generation succession... “Value chain integration, enhancing expertise”
Hankuk Carbon underwent changes in 2023. It merged with Korea New Materials, where Jo Moon-soo's eldest son, Jo Yeon-ho, is the largest shareholder. Hankuk Carbon issued new shares as compensation for the absorption merger, which were given to the owner family who are shareholders of Korea New Materials, and Jo Yeon-ho's 70% equity in Korea New Materials was exchanged for equity in Hankuk Carbon.
Jo Yeon-ho only held 3.72% equity in Hankuk Carbon before the merger, but his stake increased to 13.86%, making him the second-largest shareholder after Jo Moon-soo.
Jo Yeon-ho, born in 1994, is the third of two sons and two daughters and graduated from the Department of Aeronautics at Imperial College in London. He joined Hankuk Carbon in January 2016 and took on his executive role at the age of 29 in June 2023. He currently works as the head of the strategic planning office.
His two older sisters, Jo Kyung-eun (37) and Jo Yoon-seo (36), are working in the strategic planning office and brand marketing team at Hankuk Carbon, respectively.
Hankuk Carbon completed its succession work in June of last year. Chairman Jo Moon-soo decided to gift 1.56 million shares of the company's stock to Jo Yeon-ho, increasing his equity stake to 16.86%. After another gift, Jo Yeon-ho secured 22.86% equity, making him the largest shareholder. He now oversees 11 unlisted affiliates, including Lips, HC Networks, and Korea Global Solutions, through his equity in Hankuk Carbon.
At that time, Hankuk Carbon stated regarding its merger with Korea New Materials, “We plan to enhance our expertise and internalize core materials for LNG transport thermal insulation to increase competitiveness.” However, it did not express its position on Jo Yeon-ho's succession of management rights.
◇Despite the increase in LNG carrier demand... the third generation's management ability is a 'question mark'
After Jo Yeon-ho became the largest shareholder, Hankuk Carbon experienced a surge in its performance. This was due to the increase in demand for LNG carriers, which led to an influx of orders for thermal insulation materials. The revenue, which was approximately 594.4 billion won on a consolidated basis in 2023, increased to about 741.7 billion won last year, and the operating profit also more than doubled from about 16.5 billion won to approximately 45.4 billion won.
Despite the solid performance, Jo Yeon-ho faces the task of proving his management abilities. It is unclear whether he is directly involved in business and management within Hankuk Carbon.
However, the unmanned aircraft and unmanned aerial vehicle manufacturer 'Korea Aerospace Technology Inc.', where Jo Yeon-ho has served as CEO since 2023, has not managed to avoid deficits.
Established in 2018, this company, a subsidiary of Hankuk Carbon, recorded sales of about 478 million won and an operating loss of about 1.235 billion won in the year Jo Yeon-ho took over as CEO. The following year's sales (around 580 million won) saw a slight increase, but it incurred losses exceeding 900 million won.
An accountant noted, "It appears there is an intention to place the successor in the subsidiary executives to observe the main business and internal atmosphere and to allow them to gain experience by having them lead the affiliate," and described it as "a training process often seen during succession."
They added, "Although Hankuk Carbon's dividend payout ratio was stable at 45% in 2021, it has decreased since then," and stated, "With the succession work completed and favorable business conditions for LNG, the third generation needs to prove their management abilities to expand dividends in order to solidify their position inside and outside the company."