CJ Group, Koreas 20th largest conglomerate, has adopted an emergency strategy as a steep decline in profits of its key affiliates is directly hitting the companys bottom line

2013-05-19 19:15

CJ adopts emergency strategy

By Kim Yoo-chul

CJ Group, Koreas 20th largest conglomerate, has adopted an emergency strategy as a steep decline in profits of its key affiliates is directly hitting the companys bottom line, CJ officials said Sunday. Chairman Lee Jay-hyun is considering closing some of its money-losing businesses while focusing on core and lucrative areas to enhance profitability. The money that will be saved from the cost-cutting efforts will be used to find new cash-cows and to expand its overseas businesses. All of our affiliates went into emergency management mode since early this month. Weve told employees to start work about an hour early, said a group official. Thats part of efforts to boost competitiveness amid market uncertainty. CEOs of the group affiliates agreed to draw up survival plans. The group is tightening its belt. It asked executives to reduce expenditures using corporate credit cards. Only sales personnel are allowed to use cards to treat clients and business partners after regular working hours.If one division spends beyond the budget limit, then the head of that division will be held responsible, said the official.

The move came as the groups key cash-generator — CJ Cheil Jedang — is suffering from a sharp decline in margins. Other affiliates have also performed poorly in recent months amid slow local demand and economic uncertainty.

During the first three months of this year, Cheil Jedangs profit dropped by almost 12 percent from a year earlier.

The combined profit of Cheil Jedang and the groups logistics unit CJ Korea Express fell 21 percent year-on-year during the same period.

We need to make efforts to turn the ongoing difficulties into a chance to make the company more profitable, Cheil Jedang CEO Kim Chul-ha said in a message to employees.

CJ E&M, the entertainment affiliate which owns various cable TV channels, is also considering restructuring.

Lee said earlier that this year will be crucial for the groups global expansion.

By 2020, CJ aims to generate 100 trillion won in sales, 70 percent of which it expects will come from outside Korea. It also aims to grow at least two of its core affiliates into global leaders in their respective fields.

CJ was separated from Samsung Group in 1993. Samsung Electronics Chairman Lee Kun-hee is the younger brother of Lee Maeng-hee, the former president of CJ.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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