[Edaily Marketin YunJi Kim Reporter] The reorganization proceedings for Eugene Kemtech, which has been operating in the industrial water treatment and wastewater treatment plant business for over 30 years, have been terminated. After falling into financial difficulties due to rising raw material prices and a decline in new orders, the company sought to make a comeback through mergers and acquisitions (M&A), but ultimately failed to cross the threshold of reorganization after being unable to formulate a reorganization plan.

According to investment banking (IB) industry sources on the 4th, the 14th Division of the Seoul Bankruptcy Court recently decided to terminate the reorganization proceedings for Eugene Chemtech. The court ruled that Eugene Chemtech had failed to submit a reorganization plan by the specified deadline and that it was clear the company’s value upon liquidation would exceed its value if it continued operations.

Founded in 1994, Eugene Kaimtech is a specialized company that designs, manufactures, and installs water treatment and wastewater treatment facilities used in power plants and industrial facilities. It possesses the capability to supply equipment covering the entire water treatment process, from industrial water purification to wastewater treatment and chemical dosing. The company has secured major state-owned power generation firms, such as Korea Western Power and Korea Southern Power, as key clients, and has carried out more than 30 water treatment projects in collaboration with companies including Doosan Heavy Industries & Construction, POSCO Engineering & Construction, Daewoo E&C, and Hyundai E&C. It has also solidified its position in the domestic and international power plant markets by participating in thermal power plant projects in Vietnam.

Eugene Kemtech identified desulfurization catalysts as its next growth engine. Building on the technological expertise accumulated in its existing water treatment business, the company set out to target overseas markets by promoting its proprietary “MAS” technology. In May of last year, while accelerating business expansion—including supply negotiations with a power plant in the Philippines—the company also sought to secure 15 billion won in investment. The plan was to begin full-scale overseas supply by securing raw materials and expanding production facilities.

However, contrary to its plans for new business expansion, operating conditions in its existing business rapidly deteriorated. Amid rising costs due to higher raw material and labor expenses, the number of new project orders also declined. Given the nature of the plant business, where revenue is heavily dependent on order intake, the decrease in work volume further exacerbated the burden of fixed costs, such as labor expenses and headquarters operating costs.

Actual performance also deteriorated sharply. According to corporate information provider NICE Rating & Information, Eugene Kemtech’s revenue last year was approximately 10.9 billion won, a decrease of about 38% from the previous year’s figure of approximately 17.7 billion won. During the same period, operating profit shifted from a surplus of approximately 1.8 billion won to a deficit of approximately 3.3 billion won, and net income also turned from a surplus of approximately 1.3 billion won to a net loss of approximately 4.3 billion won. The combination of declining revenue and deteriorating profitability has further increased the company’s financial burden.

The deterioration in performance added further strain to an already fragile financial structure. Amid massive operating and net losses last year, Eugene Chemtech’s total capital turned negative, plunging the company into a state of complete capital impairment. The situation called for urgent action not only to restore profitability but also to improve its financial structure.

After entering rehabilitation proceedings, Eugene Chemtech found a new owner by leveraging the technological capabilities and order track record it had built up in the power plant sector; however, it was unable to formulate a rehabilitation plan. The company filed a petition with the Seoul Bankruptcy Court on February 24 to commence reorganization proceedings and received a decision to commence the process on March 25. Subsequently, it selected a sale agent and pursued a pre-approval M&A through measures such as a third-party private placement. However, with the determination that the liquidation value exceeded the going-concern value, the company’s attempt at a turnaround through reorganization also fell through.

While water treatment companies have consistently attracted interest in the M&A market, some analysts suggest that a business structure reliant on securing new plant contracts could pose a burden to potential acquirers. An official in the domestic capital market explained, “Water treatment companies are highly valued in the M&A market when they generate stable profits based on long-term operating contracts,” adding, “On the other hand, companies whose performance is dependent on winning new project contracts—even if they have a strong track record of past construction projects—are unlikely to attract buyers readily, as it is difficult to expect stable cash flow if future work is uncertain.”