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Photo = Hyosung Chemical |
[Alpha Biz= Paul Lee] Hyosung Chemical has seen its credit rating downgraded due to persistent losses in its polypropylene (PP) business and deteriorating financial health, amid intensified market competition and oversupply. Analysts warn the company may again face capital erosion in the second half of the year.
On July 2, Korea Ratings (Korea Ratings Corporation) downgraded Hyosung Chemical’s unsecured bond rating from “BBB+ (Negative)” to “BBB (Stable)”, and its short-term credit rating from A3+ to A3.
The downgrade reflects the company’s continued operating losses, primarily driven by underperformance in its PP segment. A prolonged downturn in spread margins due to weak demand and global oversupply has severely impacted earnings. Hyosung Chemical reported an operating loss of KRW 336.7 billion in 2022, KRW 213.7 billion in 2023, and KRW 170.5 billion in 2024. In the first quarter of this year alone, it posted a KRW 59.7 billion loss.
As losses mounted, the company’s financial stability came under pressure. As of Q1 2024, its consolidated shareholders’ equity stood at KRW 30.1 billion—just narrowly escaping a capital impairment status, following a negative equity of KRW -6.8 billion at the end of 2023. However, the fragile recovery remains vulnerable due to high interest burdens and weak core business performance.
Although Hyosung Chemical maintains a separate (standalone) equity of KRW 380.8 billion, its consolidated capital is being weighed down by struggling subsidiaries. The firm had previously canceled a planned KRW 50 billion bond issuance in March due to concerns over its financial credibility.
To improve its balance sheet, Hyosung Chemical has been divesting non-core assets. In December 2024, the company agreed to sell its Neochem division for KRW 921.6 billion, a deal that closed in January 2025. It also sold its Onsan Tank Terminal business for KRW 150 billion in April. These proceeds were reportedly used to repay debt and support liquidity.
Despite temporarily averting capital erosion, the company’s turnaround hinges on revitalizing its core PP operations, which account for 50–60% of total revenue. The global PP market continues to struggle amid oversupply from China and sluggish demand due to economic slowdown and a shift toward eco-friendly materials. As of Q1 2024, the domestic PP spread stood at just USD 76/ton, far below the break-even point of USD 300/ton.
Industry observers expect Q2 earnings to remain weak as cheap Chinese PP floods neighboring markets, limiting price recovery. High fixed costs and low plant utilization are also expected to persist, raising the risk of renewed capital impairment in the second half of the year.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
