1. What Happened? Taekwang HwaSum Suspends Spandex Operations

Taekwang HwaSum, a subsidiary of Taekwang Industrial, will suspend its spandex business operations starting October 31, 2025. The scale of the suspension is significant, amounting to KRW 94.3 billion, which represents 4.45% of Taekwang Industrial’s total sales.

2. Why the Suspension?

The specific reason for the suspension has not been disclosed in the announcement. We will update this information as further details become available.

3. How Will This Impact Taekwang Industrial?

3.1 Financial Impact

  • Sales Decrease: Q4 sales are expected to decrease by at least KRW 94.3 billion.
  • Operating Profit Decrease: Decreased sales, coupled with fixed cost burdens and potential discounts on inventory sales, will inevitably lead to a decline in operating profit.
  • Cash Flow: While cash inflow from inventory sales is expected, the suspension of production lines and recovery costs may negatively impact cash flow.

3.2 Non-Financial Impact

  • Damage to Corporate Image: The suspension raises concerns about the company’s stability and may amplify existing concerns regarding corporate governance, especially considering ongoing conflicts with minority shareholders.
  • Weakened Competitiveness: This provides competitors an opportunity to increase market share, and Taekwang HwaSum may face challenges in recovering its competitiveness after the suspension.
  • Negative Investor Sentiment: Stock price decline and potential withdrawal of foreign investors are likely.

4. What About External Factors?

External factors such as exchange rates, raw material prices, interest rates, and the global economic climate can also influence Taekwang Industrial. The USD/KRW exchange rate and crude oil price fluctuations, in particular, warrant close attention.

5. What Should Investors Do?

Investors should carefully analyze the short-term and long-term impacts of the suspension and continuously monitor future announcements and news to adjust their investment strategies. It is crucial to pay close attention to the company’s response strategy and its efforts to resolve conflicts with minority shareholders.