Alutech, a private company 100% owned by Aluco Group Chairman Park Do-bong's family, generated substantial profits through internal transactions with listed affiliates over approximately 20 years, according to Financial Supervisory Service electronic disclosure filings. The company derived 96.9% of its revenue from affiliate transactions while maintaining an operating margin of 8.05%, significantly higher than listed affiliates Aluco (1.04%) and KPTIU (3.47%). Market observers have cited this internal transaction structure as a factor contributing to the undervaluation of listed companies, a phenomenon known as the "Korea discount," with the Democratic Party's special committee on capital markets specifically highlighting owner-family company transactions as a valuation concern.
Alutech Derives 96.9% of Revenue from Affiliate Transactions
Alutech's revenue structure shows heavy reliance on internal group transactions. The company recorded total revenue of 87.5 billion won, of which 84.8 billion won came from transactions with affiliates including Aluco, KPTIU, Hyundai Vina, ALK VINA, and HDAL Vina. This represents 96.9% of total revenue. Alutech operates an aluminum alloy billet casting business, with affiliates purchasing billets for reprocessing. Despite generating revenue primarily from affiliates, Alutech maintained an operating margin of 8.05%, compared to 1.04% for Aluco and 3.47% for KPTIU on a separate basis. The company's retained earnings reached 50.6 billion won, representing a more than 100-fold increase from 470 million won in 2006.
Park Do-bong Family Holds 100% Ownership Through Combined Stakes
Chairman Park Do-bong acquired Alutech in 2005 when it had capital of 1 billion won and operating profit of 100-200 million won. Current ownership is distributed as follows: Park Do-bong 42.4%, wife Oh Jung-ja 10.3%, daughter Park Se-ra 8.9%, and son Park Jun-hee 15.7%. Including treasury shares, the Park family holds 100% of Alutech's equity. Alutech sits at the apex of Aluco Group's governance structure, with ownership flowing through Alutech → KPTIU → Aluco. The group comprises 16 companies total, including KOSPI-listed Aluco and KOSDAQ-listed KPTIU.
Aluco Group Affiliates Provide 448 Billion Won in Loans to Alutech
Aluco Group affiliates extended 44.8 billion won in loans to Alutech to support raw material procurement. The loan breakdown shows Aluco provided 21.7 billion won, Hyundai Aluminum 20.1 billion won, and KPTIU 3 billion won. Additionally, Aluco and Hyundai Aluminum provided payment guarantees for 57 billion won in financial institution loans to Alutech. Alutech also holds a 49.5% stake in Alu Materials, a holding company that manages Aluco Group's overseas affiliates. Park Do-bong and Park Se-ra serve as co-representatives of Alu Materials. The company generated 700 million won in revenue entirely from affiliates including Aluco, ALK VINA, and HYUNDAI ALUMINUM VINA, with 500 million won allocated to employee salaries and fees for five employees including representatives.
Listed Affiliates Trade Below Book Value Amid Internal Transaction Concerns
Aluco and KPTIU trade at price-to-book ratios of 0.44x and 0.35x respectively. The Democratic Party's K-Capital Market Special Committee on Korea Premium held a discussion forum titled "Legislative Tasks for Anti-Stock Manipulation Laws to Resolve Korea Discount," where participants identified owner-family company transactions that transfer profits from listed companies as a contributing factor to undervaluation. The committee's forum specifically addressed cases where listed companies conduct transactions with owner family companies.
Aluco Group Defends Transaction Structure as Cost-Efficient
An Aluco Group official stated that while Alutech's operating margin stands at 8%, the profit rate is not high when interest rates on borrowings are factored in. The official added that Alutech's existence enables the group to procure billets at lower prices compared to purchasing from external suppliers, and that this structure is far removed from owner self-dealing.
FAQ
What percentage of Alutech's revenue comes from Aluco Group affiliates?
Alutech generated 84.8 billion won out of 87.5 billion won in total revenue from transactions with Aluco Group affiliates including Aluco, KPTIU, Hyundai Vina, ALK VINA, and HDAL Vina, representing 96.9% of total revenue.
How does Alutech's operating margin compare to listed affiliates Aluco and KPTIU?
Alutech maintained an operating margin of 8.05%, while listed affiliates Aluco and KPTIU recorded operating margins of 1.04% and 3.47% respectively on a separate basis, despite Alutech deriving 96.9% of revenue from affiliate transactions.
What financial support do Aluco Group affiliates provide to Alutech?
Aluco Group affiliates extended 44.8 billion won in loans to Alutech, with Aluco providing 21.7 billion won, Hyundai Aluminum 20.1 billion won, and KPTIU 3 billion won. Aluco and Hyundai Aluminum also provided payment guarantees for 57 billion won in financial institution loans to Alutech.
