Backed by a rebound in catch and tuna prices, South Korea’s largest deep-sea fishing company Dongwon Industries Co. is expected to continue to post solid earnings in the rest of this year.

Dongwon Industries, founded in 1969, has grown to the world’s largest tuna purse seiner operator since it introduced seiners for the first time in Korea, and its canned tuna business is also No. 1 in the global market. However, the company has struggled over the past few years as the falling fish prices and aging vessels has hurt its fishery business, which accounts for 20 percent of its total sales. Its operating profit plunged from 110 billion won ($98 million) in 2013 to 81.1 billion won in 2014 and to 57.3 billion won in 2015.

But thanks to the recovery in its fishery business, its operating profit for the January to June period amounted to 64.3 billion won and its sales rose 100 billion won on year to 780 billion won. This year’s operating profit is expected to exceed 100 billion won after its second-quarter operating profit surged 206 percent on year to 45.2 billion won. The fishery business returned to profit in the April to June period in seven quarters after the division posted 12.7 billion won in operating income on sales of 100 billion won, which was up more than 60 percent on year.

The rapid recovery is mainly driven by Donwon’s bold investments. Its catch recovered greatly when it disposed of two aging vessels in the third quarter 2014 and launched four new S-class ships that are capable of catching fish twice more than C-class ships. The company currently has seven S-class ships with six of them operating in the Midwestern Pacific. It has 15 deep-sea seiners and four of them are large-sized vessels whose prices reach 25 billion won per ship.

“Dongwon Industries is expected to see its sales grow by 2.8 percent per year on average over the next three years and operating profit would rise to 144 billion won by 2018 as the replacement of its old fleets with new ones would boost the amount of catch significantly,” said Kim Yoon-oh from Shinyoung Securities Co. Shinyoung Securities estimated that Dongwon’s tuna catch would increase from 130,000 tons in 2015 to 160,000 tons in 2018.

A rebound in tuna prices has also contributed to the improvement in the company’s earnings. Tuna prices averaged $1,500 per ton in the second quarter this year, up 34.2 percent from the same period last year. In the latter half, the prices are expected to remain above $1,400 per ton as fish aggregating device ban is scheduled in the third quarter and weather issues have reduced working days.

Prospects are also bright for its distribution business that represents 63 percent in its entire business. Starkist Co., wholly owned by Dongwon, is the leading canned tuna provider in the U.S., accounting for 40 percent in the market. Its canned tuna business is benefitting from a synergy effect created by Dongwon Industries’ stable supply of tuna and its affiliate Dongwon F&B Co.’s prowess in producing canned fish and retailing.

The company that has been aggressive in mergers and acquisitions is expected to continue to seek acquisition targets amid an excessive supply in the canned tuna market. It took over the U.S. Starkist in 2008 and Senegal’s state-owned cannery in 2011. It reportedly plans to enter the European market through acquisition.

Dongwon Industries shares fell 0.34 percent to 289,000 won as of 9:25 a.m. in Seoul trading Thursday. The price is far below the highest price of 360,000 won over the past year and its price-to-book value ratio (PBR) hovers at 1.37, suggesting that its shares have room to rise.

By Lee Yong-gun

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