Tong Yang Cement Corporation

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Tong Yang Cement Corporation

Tongyang Security Building, 23-8 Ye
Seoul
South Korea
Telephone: (+82) 2 3770 3000
Fax: (+82) 2 3770 3305
Web site: http://www.tongyangmajor.com

Wholly Owned Subsidiary of Tong Yang Major Co.
Incorporated: 1957 as Tong Yang Cement Industrial Co. Ltd.
Employees: 1,460
Sales: KW 524.16 billion ($1.25 billion)(2002)
NAIC: 327310 Cement Manufacturing; 327320 Ready-Mix Concrete Manufacturing

Tong Yang Cement Corporation is one of South Korea's two leading cement producers and is among the world's largest specialized cement manufacturers, with a total production capacity of close to 14 million tons per year. The company's primary production facility is in Samchok, which churns out more than ten million tons of cement per year. With seven fully automated kilns, the Samchok site claims to be the world's largest single cement production facility. Tong Yang also operates plants at Donghae and Kwangyang, which each produce more than one million tons per year. The company specializes in the production of slag cement (which uses waste materials from iron production to produce a fortified cement), producing more than 1.1 million tons per year. Tong Yang's cement production is backed by limestone quarries with reserves of some 100 years. The company also operates cement silos in Busan, Ulsan, Changwon, Yosu, Gunsan, and Incheon, giving it full coverage of the national market. Tong Yang pioneered cement exports from Korea, operating a fleet of bulk carriers to supply the Japanese, Chinese, and U.S. markets. In addition to production, Tong Yang has its own research and development center where it develops new cement production technologies. Tong Yang Cement forms the core of a diversified chaebol, or conglomerate, Tong Yang Major, through which it is listed on the Korea Stock Exchange. Tong Yang Cement is led by CEO Roh Young-in.

Rebuilding Korea in the 1950s

Tong Yang Cement Industrial Co. Ltd. was founded in 1957 as part of South Korea's efforts to rebuild following the devastation of the Korean War. Headquartered in Seoul, the company began construction of its factory in Samchok in order to take advantage of the region's extensive limestone deposits. The Samchok plant launched operation with a production capacity of just 80,000 tons per year.

Yet the company quickly began expanding the facility, and in 1959 the enlarged plant reached production levels of more than 180,000 tons. Tong Yang moved its headquarters to Samchok in 1961, and, backed by a government loan of more than $2 million, completed its second expansion that year. By the end of 1961, production had risen to 380,000 tons.

Korea's industrial development in the 1960s and 1970s created a steady demand for cement, and Tong Yang responded by continuing to expand its production capacity. By 1967, as its annual production topped one million tons, Tong Yang became Korea's largest private cement producer. The group continued its expansion into the 1970s, boosting capacity at the Samchok site to three million tons after a fourth major extension of the facility in 1975.

Tong Yang went public in 1976 with a listing on the Korea Stock exchange, anticipating the coming boom in the Korean economy with still more dramatic plans to increase capacity, while at the same time extending its operation to a national scale. In 1978, the company completed the fifth extension to the Samchok site, where capacity reached four million tons. The following year, a new production facility was opened at Bukpyung. At the same time, Tong Yang expanded its product range, and, in addition to raw cement, began offering ready-mix concrete (RMC) with the construction of an RMC plant in Seoul. These installations were complemented with the opening of a production facility in Yeosu in 1980.

Diversification in the 1980s

Tong Yang continued to add production sites, constructing facilities in Anyang and Jinju in 1983 and in Juju, Daejeon, and Gimje in 1984. The company also expanded its RMC production, building two new plants in Jumunjin and Iksan. The Samchok plant nevertheless remained Tong Yang flagship, and, after completing a new expansion in 1985, boosted its capacity to five million tons per year. Also in 1985, the company changed its name to Tong Yang Cement Co.

With business booming in the 1980s, Tong Yang continued adding to its production capacity. By 1990, the Samchok plant's capacity topped eight million tons. In 1993, the Samchok site featured seven fully automated kilns, enabling the plant to pass the 11 million tons per year mark, making it the world's single largest cement production site. In the meantime, Tong Yang had continued to extend its national network of cement silos, RMC plants, and related production sites. In 1985, the company included among these new facilities a plant in Kwangyang that produced specially reinforced slag cement using waste products from iron producers. The following year, Tong Yang opened its Institute of Technology, adding research and development capabilities.

By then, the company's operations had become increasingly diversified, as Tong Yang added production of industrial machinery and a shipping department. The company also began manufacturing home appliances, starting with gas ovens, under the Tong Yang Magic name, as well as developing interests in confectionery. By then, Tong Yang had moved into the financial markets with the 1984 acquisition of Ilkook Securities, which was renamed to Tong Yang Securities. That subsidiary was then listed on the Korean Stock Exchange in 1987.

Tong Yang was well on its way to becoming another of Korea's chaebols. The company launched assets management operations, as Tong Yang Capital Management Co., in 1988, then became a venture capital provider through new subsidiary Tong Yang Venture Capital in 1989. The following year, the company acquired Daewoo Investment & Finance, which was then renamed Tong Yang Investment & Finance. Also in 1990, Tong Yang launched a commodities trading subsidiary, Tong Yang Futures America, in Chicago.

During the 1990s, the company began to spin off a number of its diversified operations into independent subsidiaries. In this way, the company created Tong Yang Shipping Co. in 1991 and Tong Yang Machinery & Engineering Co in 1992. In the latter year, the company also launched Orion Asset Management Co., based in New York City, which complemented its new European operations, Tong Yang Securities Europe, based in London. In other diversification moves, the company entered the information technology market in 1991 and launched a construction division in 1992. Another subsidiary, Tong Yang Industrial Machine, took over the group's growing appliance business, and, in 1996, was renamed Tong Yang Magic Co.

Specialized Cement Producer in the New Century

Despite its diversification, cement and concrete production remained Tong Yang's largest business. In the late 1980s, increases in the company's production levels enabled it to begin exports, starting with Japan, where the company opened a subsidiary in 1988. Mainland China also became a major export market for the company, prompting Tong Yang to open a subsidiary in Beijing in 1993. By 1996, the company had built its own Chinese production facilities, including raw cement and RMC plants in Beijing. The group's investment in bulk carriers later enabled it to become a low-cost shipper, leading Tong Yang to enter the U.S. market in the 1990s as well. By 1995, Tong Yang had recorded a new production milestone—100 million tons per year.

Hit hard by the economic crisis of the late 1990s, especially the collapse of the Korean construction market, Tong Yang was forced to restructure. Leading the group was newly appointed CEO Roh Young-in. Roh moved quickly to reorganize the group, slashing its executive team from 23 to just 9. Roh also began selling off a large number of the group's properties, including a number of its plants, helping to raise cash to pay down its debt. In addition, Roh began lobbying the Korean government to change its regulations so that the country's chaebols could reform under a holding company structure.

Roh's efforts were successful, and in 2000 the company reorganized, creating a new holding company, Tong Yang Major Co. Nevertheless, the large cement backlog built up at the end of the previous decade forced the company to seek added cash. The company stepped up its export efforts and by 2003 had increased that part of its sales to more than one million tons per year.

Key Dates:

1957:: Tong Yang Cement Industrial is founded, and a cement plant is constructed at Samchok.
1959:: The first expansion of the Samchok plant more than doubles production capacity.
1961:: Headquarters move from Seoul to Samchok.
1967:: The Samchok site tops one million tons per year in production capacity.
1976:: Tong Yang goes public on the Korean Stock Exchange and completes a new plant at Busan.
1984:: Tong Yang's acquisition of Ilkook Securities marks the beginning of a diversification drive.
1988:: Company begins exports to Japan, and opens a Japanese subsidiary.
1993:: Tong Yang opens an office in Beijing and starts exporting to China.
2000:: Tong Yang adopts a holding company structure, changing its name to Tong Yang Major Co.
2001:: Lafarge buys a 25 percent stake in Tong Yang's cement operations, which is then spun off as a joint-venture company, Tong Yang Cement Corporation.
2003:: Tong Yang Major buys back Lafarge's stake in Tong Yang Cement.

In 2001, Tong Yang Major announced its interest in selling part of Tong Yang Cement. By November 2001, the company had reached an agreement to sell 25 percent of the cement business to France's Lafarge Group in a deal worth KW 137.5 billion (U.S.$116 million). The company was then spun off into a new joint-venture, Tong Yang Cement Corporation. The agreement to sell the stake in its core business was seen as a prelude to an eventual complete takeover of the Korean cement business by Lafarge, especially since Tong Yang Major announced its intention to redevelop itself as a leading e-business group.

With the construction sector once again on the rise, and with its increasing export business, Tong Yang Cement had once again become profitable in the early 2000s, posting a net profit of KW 72 billion (U.S.$55 million) in 2002. By the end of 2003, the company was able to buy out its joint venture partner, paying Lafarge $138 million to complete the transaction. As Roh told JoongAng Daily, "Since the 1997–98 financial crisis, numerous companies have been taken over by foreign capital due to financial difficulties. But we will be a rare case to have regained the stake we had sold after only two years. I think the ruthless restructuring and export-centered strategy have worked. The timely boom in the construction business also helped." After nearly 50 years as a major cement supplier to Korea, and the world, Tong Yang had laid a strong foundation for its future.

Principal Competitors

Kumgang Korea Chemical Company Ltd.; Ssangyong Cement Industrial Company Ltd.; Sung Shin Cement Manufacturing Company Ltd.; Hyundai Cement Company Ltd.; Asia Cement Manufacturing Company Ltd.; Hanil Cement Company Ltd.; Koryo Cement Manufacturing; Union Corp.