Treasury share cancellation set for January, cutting shares outstanding by 1.2%

Stock split to be resubmitted at next year's annual general meeting

Move aimed at expanding share liquidity

Third-quarter sales hit 6 trillion won, up 46% year on year

Operating profit falls 48% to 141.7 billion won

Early costs from US smelter weigh on margins

An aerial view of Korea Zinc's Onsan smelter [Korea Zinc]
An aerial view of Korea Zinc's Onsan smelter [Korea Zinc]

Korea Zinc plans to cancel treasury shares worth about 214.4 billion won ($160 million) and revive a stock split that had been suspended by a lawsuit. Third-quarter sales surged 46.3% from a year earlier to top 6 trillion won, though operating profit fell 48.2%, leaving the company with strong top-line growth but squeezed margins.

Korea Zinc said its board met Wednesday and resolved to cancel 246,665 treasury shares on Jan. 13. The cancellation is valued at about 214.4 billion won, calculated using Tuesday's closing price of 869,000 won per share.

The shares to be cancelled are existing treasury stock. The decision follows a July board resolution to cancel a portion of the company's holdings by the end of February next year, which the latest announcement puts into concrete form.

The shares earmarked for cancellation represent about 51.4% of the 479,737 treasury shares currently held. Once completed, total shares outstanding will fall roughly 1.2%, from 20,872,969 to 20,626,304.

The remaining 233,072 treasury shares are to be used over the next 10 years for employee compensation and other purposes.

Korea Zinc also said it will revive its stock split, planning to put a motion to amend its articles of incorporation on the agenda at the annual general meeting in March next year. The split ratio and detailed schedule will be finalized at a board meeting ahead of the AGM.

Korea Zinc passed a stock-split resolution at an extraordinary general meeting in January last year, but follow-up procedures were halted after MBK Partners' SPC Korea Corporate Investment Holdings and Youngpoong filed a lawsuit challenging the validity of that resolution.

This time, Korea Zinc will pursue the split by submitting a fresh agenda item separate from the earlier resolution. A stock split divides each share into multiple shares, lowering the per-share trading price to increase the number of shares in circulation and improve accessibility for investors.

Korea Zinc will also continue paying quarterly dividends. The board set the third-quarter dividend at 5,000 won per share, with a record date of Nov. 29 and payment expected in early December. The company has paid 5,000 won per share each quarter this year, bringing the cumulative dividend for the first three quarters to 305.9 billion won.

"The treasury share cancellation, the renewed push for a stock split, and the steady quarterly dividend are all part of a consistent policy to enhance shareholder value," a Korea Zinc official said. "We will continue to pursue shareholder-return policies while strengthening our core business competitiveness and future growth engines, so that the gains in corporate value flow back to our shareholders."

Third-quarter earnings released the same day showed profitability deteriorating even as sales climbed.

Korea Zinc's consolidated third-quarter sales came in at 6.09 trillion won, up 46.3% from 4.16 trillion won in the same period last year. Sales have remained above 6 trillion won for three consecutive quarters since the first quarter of this year.

Operating profit, however, fell 48.2% to 141.7 billion won from 273.4 billion won a year earlier. Compared with the second quarter of this year, when operating profit reached 587.1 billion won, the decline was 75.9%.

The operating profit margin dropped to 2.3% from 6.6% in the third quarter of last year, a fall of 4.3 percentage points. Sales grew sharply, but rising costs eroded profitability.

Net profit for the period in the third quarter was 225.4 billion won, up 218.6% from a year earlier.

For the first nine months of this year, cumulative sales reached 18.53 trillion won and cumulative operating profit totaled 1.47 trillion won, up 56.8% and 83.6%, respectively, from the same period last year.

On a non-consolidated basis, third-quarter sales rose 40.2% year on year to 3.66 trillion won, while operating profit edged down 4.6% to 224.3 billion won. On a consolidated basis, Korea Zinc extended its streak of quarterly operating profit to 107 consecutive quarters.

Korea Zinc said lower metal prices, a weaker won-dollar exchange rate, and early investment costs related to its US smelter construction project all weighed on third-quarter profitability.

Korea Zinc is currently developing "Crucible," a critical-minerals smelting project in Tennessee that will require an investment of $7.4 billion. The project cleared a US federal environmental review in September, and the company plans to expand production of critical minerals such as germanium to diversify its product mix.


kwater@heraldcorp.com