[News Space=Reporter seungwon lee] Rinnai Korea (CEO Cho Sang-hoon, Yoshikazu Tanaka) saw a slight increase in sales last year, but its operating profit soared by a whopping 153% and net profit by 84%.

However, despite the good performance, the net assets of its affiliate, Rinnai Plus, are in minus (-1.56 billion won), resulting in complete capital impairment. As the possibility of recovering accounts receivable from Rinnai Plus is low, a provision for bad debts has been set up.

According to the audit report disclosed in the Financial Supervisory Service's electronic disclosure system on the 7th, Rinnai Korea's sales in 2024 increased by 3.7% to KRW 286.9 billion compared to the previous year (KRW 276.7 billion).

Operating profit soared 153% year-on-year to KRW 8.1 billion (KRW 3.2 billion). Net income also increased 83.7% year-on-year to KRW 9 billion (KRW 4.9 billion). Operating profit margin also improved to 2.8% year-on-year (KRW 1.2%).

In 2024, selling and administrative expenses were KRW 51.7 billion, up 9.4% from the previous year (KRW 47.2 billion). Of this, advertising and publicity expenses were KRW 6.8 billion (KRW 3 billion from the previous year, up 122%), salaries were KRW 14 billion (KRW 14.5 billion from the previous year, down 3.5%), and commissions were KRW 9.9 billion (KRW 8.8 billion from the previous year, up 13.3%). 

The debt ratio was 59.8% (total liabilities 72.1 billion won / total capital 120.6 billion won), and the current ratio was 207.6% (current assets 115.6 billion won / current liabilities 55.7 billion won).

Cash and cash equivalents were identified as KRW 46 billion (KRW 42.2 billion in the previous year), and intangible assets were identified as KRW 480 million (industrial property rights).

In addition, special related party transactions such as sales of 540 million won, purchases of 1.04 billion won, and other transactions with the controlling company, Rinnai Corporation, are continuously occurring. This is a factor that increases management uncertainty due to changes in parent company policies, price policies, and global supply chain issues.

A provision for bad debts of KRW 2.8 billion was set for accounts receivable from a subsidiary (Rinnai Plus). This means that the financial status of the subsidiary has deteriorated and the possibility of receivables being recovered is low, which means that there is a structural risk of additional losses in the future or uncertainty in recovering investment funds.

In fact, Rinnai Plus Co., Ltd.’s net assets are in the negative (-1.56 billion won), and it is in a state of complete capital erosion. If actual management normalization is not achieved, Rinnai Korea’s investment loss may become a reality.

As of 2024, assets worth 21.35 billion won, including land and buildings, are provided as collateral to financial institutions. There may be contingent liability risks such as the exercise of collateral rights in the event of financial market fluctuations.

There is no cash dividend, and the entire net income for the period (KRW 9 billion) was accumulated as a discretionary reserve in retained earnings. As a result, retained earnings increased by 10.4% to KRW 96.6 billion from KRW 87.5 billion the previous year.

As of the end of 2024, there are no ongoing litigation cases.

Looking at the major management performance and business status, the sales base has expanded through new project orders from large construction companies such as Daejeon Seonhwa 2nd Apartment Complex and Haeundae Udong Cascade. However, it is exposed to external risks such as raw material price volatility and exchange rate fluctuations.

A corporate financial analysis expert analyzed, "Rinnai Korea achieved solid sales growth and significant improvement in operating profit in 2024. In particular, there are some burdensome factors such as an increase in selling, general and administrative expenses and special related party bad debt provisions, but overall, the financial structure is stable." He added, "The construction market, raw material and exchange rate fluctuations, and cost structure management are expected to be key points of interest in the future."

He continued, "Rinnai Korea's structural pain points can be summarized as ▲possibility of loss of investment funds in subsidiaries ▲dependence on transactions with special related parties ▲rapid increase in judgement and administrative expenses ▲risks of inventory, foreign currency, and raw materials," and pointed out, "there is no immediate management crisis or refusal of audit opinion, but in the mid to long term, profitability management and risk response are emerging as important tasks."

Meanwhile, Rinnai Korea is a foreign company established on January 22, 1974 with the main business purpose of manufacturing and selling household, industrial, and industrial gas appliances and parts. It is headquartered in Sipjeong-dong, Bupyeong-gu, Incheon. Its capital is 15.1 billion won.

The largest shareholder, Rinnai Corporation, holds an overwhelming 97.7% stake, with the remaining 2.3% held by Singapore-based Rinnai Holdings (Pacific) Pte Ltd.

It is a completely foreign corporate structure in which no domestic general shareholders, institutions, or employees own even a single share. The governance structure is one in which the Japanese Rinnai headquarters exercises full management rights, and the general shareholders' meeting and major decision-making are also led by the Japanese headquarters.