Inter-unit Deals Account for 68% of Samyang Group Sales
The Financial Supervisory Service announced on June 4 that Samyang Holdings, which is the holding company of Samyang Group, posted a total profit of 58.1 billion won last year, including 35.9 billion won derived from internal transactions. The ratio was 61.8 percent in 2019 and approximately 40 percent to 50 percent for several previous years.
In 2019, Samyang Holdings generated more than half of its sales by internal transactions, which include subsidiaries’ brand use and shared service center (SSC) services. Samyang Holdings introduced the services in 2011 to provide management consulting for subsidiaries.
In general, holding companies’ profits are based on dividend income. However, profits directly derived from subsidiaries took the largest portion in Samyang Holdings last year. In that period, the company’s dividend and equity method gains derived from subsidiaries fell 61.5 percent to 16.3 billion won and accounted for only 28.1 percent of its total profit.
The gains derived from the internal transactions went to the owner family as dividends. At present, the family owns 38.73 percent of Samyang Holdings. The company paid a dividend of 15.5 billion won last year and the family took 6.6 billion won out of the total. The dividend amount was not cut even with the holding company’s net profit falling 57.4 percent to 20.6 billion won. The dividend payout ratio amounted to 75.2 percent and Samyang Group chairman Kim Yoon in particular took about three billion won from the holding company.
This year, Samyang Group’s assets topped five trillion won and the group was designated as a business group subject to public disclosure. Such enterprises are subject to regulations in relation to owners’ profit-taking activities. The Korea Fair Trade Commission has reiterated that such activities need to be restrained.
According to the current Fair Trade Act, the regulations related to the activities are applied to every listed subsidiary where an owner family’s shareholding exceeds 30 percent and every non-listed subsidiary where the shareholding exceeds 20 percent in a business group with a total asset of more than five trillion won. In addition, the Korea Fair Trade Commission applies its regulations to an internal transaction value that exceeds 20 billion won or is equal to or greater than 12 percent of annual sales. According to statistical data, internal transactions accounted for 67.6 percent of Samyang Group’s total sales last year.