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Hankook Tire resolves to enhance shareholder value through board of directors meetings
- Announcing its effort toward increasing shareholder value through board of director resolution and shareholder letter
- Deciding to start share buyback, expand dividend, form a support group for outside directors, and implement an electronic voting system
- Reinforcing financial solvency and securing future investments by increasing revenue and profitability through innovation and selling idle properties
Seoul, Korea, Mar 24, 2020 – Leading global tire maker Hankook Tire has resolved to enhance its shareholder-friendly management including further increasing shareholder value, reinforcing financial solvency, and strengthening primary competitiveness through innovation, in their board of director resolution and shareholder letter.
First and foremost, Hankook Tire will take on diverse measures to protect shareholder rights and enhance their value. In particular, the company decided in its board of director's meeting to buy back its shares to enhance shareholder value. It plans to purchase about KRW 50 billion worth of Hankook Tire shares over the next six months.
The company will also sharply expand the size of dividends. For its 2019 settlement, Hankook Technology Group decided on a cash dividend of KRW 350 per share of common shares, sharply expanding its dividend from 2018 when it stood at KRW 300 per share. Also, its affiliate Hankook Tire has decided to pay dividends of KRW 550 per share with the total dividend amounting to KRW 68.1 billion in 2019. This is about 22% increase from 2018, when the dividend per share was at KRW 450 and the total at around KRW 55.7 billion. It will continue to put effort into raising shareholder value by improving shareholder return policy with investment plans and market conditions in consideration.
In addition, a support organization system exclusively for outside directors and external auditors will be established to enhance transparency of the corporate governance structure. An electronic voting system will be implemented to encourage shareholders to exercise their rights and expand communication with shareholders. In the long term, it plans to strengthen the role of the board of directors and audit bodies to establish an advanced corporate governance structure.
Hankook Tire, with credit rating of AA, has a stable cash flow where most of its investment funds that go into facility investment and such derive from internally generated funds based on its superior operating cash flow. The company has a very good financial structure by maintaining its virtuous cash flow circle where loan repayment is made through generation of free cash.
It will not rest on the current situation but will also focus on strengthening financial solvency and streamlining assets to secure investments. The company will sell idle properties, including the site for Busan Yeongdo Island logistics center and use the funds secured through the sale to secure new growth engines. It plans to internalize into the organizational culture, the pursuit towards a sustainable growth made possible through expansion of the win-win management system with business partners and establishment of a Jeongdo (meaning right path) management committee.
Moreover, the company plans to strengthen its primary competitiveness through active innovation in the tire industry. Representatively, Hankook Tire will innovate its business process across all areas, including product development, SCM, marketing and sales. In particular, it will expand investment in the development of tire for new vehicles and other goods, and in strengthening their supply capacity. It also plans to achieve sales growth and improve market share and profits by securing additional distribution channels in the domestic and global markets such as the U.S. and Europe.
Hankook Tire will continue to innovate in key areas such as products, distribution, and sales to actively respond to changes of the customers and the market due to digital transformation and focus all its capabilities on restoring and increasing its market share. It will also reciprocate shareholder trust by putting shareholder value in top priority during major decision-making situations such as group-level new projects.
"Although a short term revenue loss will be inevitable as Europe and the US as well as the global automobile industry is facing a difficult situation due to shutdown of factories and distribution channels caused by the spread of COVID-19, reduction of demand, etc., we will be fully prepared in advance to turn the situation around immediately after the end of the outbreak," said Hyun Shick Cho, Vice Chairman of Hankook Technology Group. "We will continue to innovate within our existing business area and look for new investment or M&A opportunities based on our superior financial structure to strengthen both our primary and future competitiveness. This will in turn further increase shareholder value."
In a separate letter to domestic and foreign shareholders and investors, the company also promised for a continuous performance sharing and communication.