TYM, a corporation in agricultural machinery, has shortened the debt guarantee period for its subsidiary, TYM North America, by 6 months. This decision is analyzed as a result of the North American subsidiary's performance stabilizing, but there are also analyses suggesting that it was made to reduce the burden of guarantees due to the rapid deterioration of the parent company's profitability.

TYM participates in the largest agricultural machinery exhibition in North America, NFMS 2025. /Courtesy of TYM

According to the Financial Supervisory Service's electronic disclosure system on the 23rd, TYM will end the debt guarantee period for its North American subsidiary (TYM North America, Inc.) 6 months early, on the 22nd.

The guarantee was made as the North American subsidiary borrowed 26.5 billion won from Citibank on Dec. 15, 2023. At that time, TYM provided a guarantee of 31.7 billion won to stabilize the management of the North American subsidiary, which corresponded to 9.49% of TYM's equity as of the end of 2022.

Industry insiders view the termination of this debt guarantee as a result of the North American subsidiary's improved performance. A professor of business administration noted, "Typically, ending a guarantee early indicates that the financial stability of the company receiving the guarantee has improved, reducing the need for the guarantee."

In fact, the North American subsidiary has consistently recorded solid performance in recent years. In the current year, the revenue of TYM North America is 366.5 billion won, with an operating profit of 9.6 billion won. The revenue for 2024 is expected to be 326.4 billion won, with an operating profit of 3.4 billion won. In the first quarter of this year, it recorded revenue of 91.6 billion won. The North American subsidiary accounts for over 40% of TYM's total revenue.

Some analysts raise the view that the parent company, TYM, experiencing a decline in performance may be a background for the early termination of guarantees. It is said that the parent company feels burdened by the subsidiary's guarantees due to deteriorating financial performance.

TYM's revenue was 1.1661 trillion won and operating profit was 122 billion won in 2022, and then sharply declined to 836.5 billion won in revenue and 76.5 billion won in operating profit in 2023. For 2024, revenue is expected to be 788.8 billion won, with an operating profit of 16 billion won.

However, TYM stated that the conclusion of the debt guarantee was more a result of consultations with the bank than the performances of the parent and subsidiary.

Meanwhile, TYM is expected to face the challenge of declining demand due to falling grain prices in the second quarter. According to Reuters, "Corn and soybean prices have dropped to their lowest levels in three years, resulting in a sharp decline in farm income in the United States, and high interest rates are anticipated to slow sales of agricultural machinery."

Tariffs from the U.S. are also a variable for the second quarter's performance. Currently, the U.S. imposes a 50% tariff on steel and aluminum products, of which steel and aluminum are representative raw materials for agricultural machinery products. TYM sources materials and supplies both domestically and overseas, making the impact unavoidable.

※ This article has been translated by AI. Share your feedback here.