[Edaily Marketin Reporter LEE GEON-EOM ] NICEHoldings announced on the 23rd that it had downgraded Pulmuone Corporate’s long-term credit rating from “A- (Negative)” to “BBB+ (Stable).” Analysts attribute this downgrade primarily to constraints on company-wide profitability due to weak performance in overseas operations and the healthcare division, as well as a decline in free cash flow generation resulting from large-scale capital expenditures (CAPEX).

In addition, Pulmuone Corporate’s hybrid capital securities rating was downgraded from ‘BBB+ (Negative)’ to ‘BBB (Stable)’, while the rating for the hybrid capital securities of its holding company, Pulmuone Corporate(017810), was downgraded from ‘A- (Negative)’ to ‘BBB+ (Stable)’.

Jeong Jin-won, a senior researcher at NICE Ratings’ Corporate Evaluation Division, stated, “While the U.S. and Chinese subsidiaries are posting solid results based on their expanded production capacity (CAPA), the Japanese subsidiary is recording an average operating profit margin of -7.9% for 2021–2025 due to sluggish local demand and aging facilities, which is hindering the overseas division’s efforts to move out of the red.” He added, “The ongoing losses in the Health Care Manufacturing and Distribution Division, which sells green juices and infant formula, as well as rising prices for imported white soybeans, are also weighing on the profitability of the domestic division.”

In fact, Pulmuone Corporate’s ability to generate free cash flow has been significantly constrained by large-scale capital expenditures (CAPEX) averaging 1057억 won over the past five years, driven by new and expanded facilities both domestically and internationally. Furthermore, the company has been unable to reduce its overall debt level due to additional funding requirements for acquiring non-controlling interests in subsidiaries, such as the acquisition of a stake in Asahiko Co-Fund in 2022 (504억 원) and the acquisition of a stake in Nasoya Co-Fund in 2024 (636억 원).

The burden of hybrid capital securities, which are essentially debt instruments, is also a factor that reduces the company’s actual financial resilience. As of the end of March this year, Pulmuone Corporate’s hybrid capital securities amounted to 2085억원, indicating that its actual financial stability falls short of the benchmark; analysts assess that the high burden of dividend payments will continue to limit future cash generation.

In particular, the credit rating downgrade of Pulmuone Corporate, a core affiliate, directly led to a weakening of the creditworthiness of the holding company, Pulmuone Corporate. As Pulmuone Corporate—which accounts for an overwhelming 63% of the group’s assets, 76% of revenue, and 62% of operating profit—saw its credit rating lowered, Pulmuone Corporate’s credit rating was also downgraded accordingly.

Senior Researcher Jeong explained, “Going forward, Pulmuone Corporate as a whole is expected to reduce investment by shifting its policy toward scaling back investment to around 50% of earnings before interest, taxes, depreciation, and amortization (EBITDA),” but added, “Since domestic and overseas investments—such as the expansion of tofu production at the Aier plant in the U.S.—are already scheduled for 2026, it is expected to take some time to see meaningful improvements in cash generation and financial stability.”

He continued, “We plan to closely monitor whether Pulmuone Corporate can maintain the competitiveness of its domestic food business, as well as whether overseas operations—including sales expansion at its U.S. and Chinese subsidiaries and the reduction of fixed costs at its Japanese subsidiary—will improve,” adding, “We will also keep a close eye on the holding company, Pulmuone Corporate, to assess how fluctuations in the financial risks of its core subsidiaries affect the creditworthiness of the entire group and its own cash flow.”