Mecaro has sold its shares in its subsidiary KOFI R&D at a cheaper rate than their face value, TheElec has learned.
The move is a big setback for the company as it was in the midst of diversifying its portfolio in light of recent poor earnings.
Mecaro had bought a 58.07% stake (a million shares) of KOFI R&D for 5 billion won back in September 2019.
However, the company sold all of this share in the first half of 2021, people familiar with the matter said.
Mecaro had bought the shares at over ten times the price of their face value, they said. But it sold them at a cheaper rate than their face value.
The money it spent for a year and half to buy the shares have been accounted as losses.
According to Mecaro’s latest quarterly report, the company had recorded a net loss of 5.556 billion won last year. This is more than the money it spent to buy shares of KOFI R&D.
According to the people, KOFI R&D had a plant to receive technology from a semiconductor back-end equipment firm. It was planning to supply these equipment to SK Hynix as a partner to the semiconductor back-end equipment firm. But this plan had not gone well and Mecaro recorded substantial losses in the process.
Mecaro’s financial statement for last year was deemed appropriate in auditing. But auditing done through Internal Accounting Control System law, the statement were deemed inappropriate. Mecaro’s control of its subsidiary KOFI R&D was deemed weak.
If a company receives two straight years of an auditor’s evaluation of inappropriate under the Internal Accounting Control System law, the company’s listing on the bourse gets reviewed. Mecaro sold its shares of KOFI R&D quickly as it believed maintaining the stake will likely lead to its financial statement again being deemed inappropriate, the people said.
A Mecaro spokesperson said the company has decided to receiving consulting from a large accounting firm to strengthen its internal accounting control system.
Mecaro’s main revenue sources are fab equipment components and materials.
In components, it offers showerheads that are used inside equipment chambers to disperse the material evenly. It also offers block heaters to heat up wafers in the chambers during the deposition process.
In materials, Mecaro’s mainstay is high-k Zr DRAM precursors. It previously supplied this to SK Hynix for their DRAM. But SK Hynix has changed their supplier to Mecaro’s competitors since it changed its process node. One of these competitors is SK Trichem, a subsidiary of SK Materials and an affiliate to SK Hynix. Mecaro believes it cannot win this order back.
This means unless Mecaro wins new orders, and DRAMs that uses the precursors are discontinued, its sales from this business could become zero. Precursors have accounted for 65.48% of its sales in 2019 and 47.72% in 2020. In the first quarter of 2021, this dropped to a further 36.3%.
Mecaro has been planning to acquire various companies to offset this likely loss in sales but the KOFI R&D situation has happened, the people said.
The company has a lot of cash in hand and will likely continue to various attempts to diversify, but it will likely reduce its business scale following the KOFI R&D situation, they added.