The Jirashi (information magazine) that Lotte Group will declare a payment moratorium early next month and lay off more than 50% of its employees has recently spread through online communities and social networking services (SNS), causing quite a stir.
In response, Lotte Group began to actively provide explanations, saying, “The contents of the Jirashi are not true,” and investor sentiment stabilized somewhat.
However, doubts about the veracity of the contents of Jirashi have not been completely erased in the market.
Panoramic view of Lotte World Tower. /Photo=Lotte Group
According to the distribution and financial investment industry on the 24th, in response to the rumor that ‘Lotte has 39 trillion won in borrowings and a 50% mass layoff theory’, Lotte Group said, “39 trillion won is not borrowings.”
Lotte explained, “This is the total debt of 11 listed companies as of the third quarter of this year, including purchase payables and unpaid bills,” and “the net debt ratio, which takes into account cash, cash equivalents, and short-term financial products, is at a lower level.” .
He added, “The rumor of layoffs of more than 50% of all employees makes no more sense.”
Lotte Group has a total of 156,000 employees, including 110,000 domestically and 46,000 overseas.
A Lotte official asked, “If it’s half of all employees, 78,000 people will be laid off, but this doesn’t make sense.”
Lotte Group operated Lotte Chemical and duty-free shops under an emergency management system this year and received voluntary retirement from some affiliates to improve manpower efficiency, but drew a line at the large-scale layoffs as unfounded.
Lotte Group said that Jirashi’s content that ‘e-commerce (e-commerce) Lotte On is in deficit in the trillions of won’ is false.
Since its launch in 2020, Lotte On has recorded a cumulative deficit of 534.8 billion won through the first half of this year.
It is also known that the content of the statement, ‘Due to Lotte Engineering & Construction’s unsold properties, it will not be easy to settle debt even if the group-owned real estate is sold,’ is also known to be different from the truth.
Lotte Engineering & Construction emphasized, “There are many sales centered around Seoul and the metropolitan area, so the risk of unsold units is not high.”
Real estate assets owned by Lotte Group amount to 56 trillion won as of last month.
Panoramic view of Lotte Chemical Daesan Plant / Photo = Lotte Chemical
The fact that affiliated companies’ performance was poor was acknowledged.
Lotte’s core distribution and chemical divisions are said to be performing poorly amid the shrinking industry and intensifying competition.
Lotte Shopping’s consolidated annual sales decreased from 15.5 trillion won in 2021 to 14.5 trillion won last year. Current liabilities increased from KRW 8.9 trillion over the same period to KRW 10.9 trillion last year.
Lotte Chemical also recorded an operating profit of 1.5 trillion won on a consolidated basis during the same period. However, it recorded operating losses of 700 billion won in 2022 and 300 billion won last year, respectively.
Lotte Shopping will utilize the strengths of offline stores, such as strengthening experiential content, while Lotte On will focus on product planning (MD) marketing utilizing the capabilities of group companies.
Lotte said, “In relation to Joonggonara (KRW 30 billion), Hanssem (KRW 300 billion), Iljin Materials (KRW 2.7 trillion), and Korea Ministop (KRW 300 billion) that have been invested or acquired starting in 2021, investment direction is more important than short-term profit and loss structure. “We need to pay attention to adequacy and mid- to long-term expected effects,” he emphasized.
Regarding the rumor of a moratorium declaration and public decomposition crisis next month, Lotte Group said, “The current stock holdings, real estate value, and deposits that can be utilized immediately amount to 108.9 trillion won,” and “there is no problem with the group’s liquidity.”
Lotte said, “As of last month, total assets amounted to KRW 139 trillion and the value of stock holdings amounted to KRW 37.5 trillion,” adding, “As of last month, the total real estate value of the group was KRW 56 trillion, and available deposits were KRW 15.4 trillion, providing stable liquidity. “We are maintaining it,” he explained.
When Lotte Group conducts an asset re-evaluation of all affiliates next year, the assessed value of its assets is expected to increase significantly compared to now and the group’s debt ratio will decrease significantly.
Review of legal action against those who first created and spread rumors
Lotte announced that it would consider legal action against the original creator and spreader of the rumor.
Lotte officials are in the position that it is absurd that such information was spread when only reassessing the real estate assets held will significantly increase the appraised value, and even assuming the worst case scenario, selling only part of the real estate will repay the debt.
Regarding Lotte Chemical’s corporate bond issue, he emphasized, “We are currently unable to increase profits due to the sluggish global industry, but there is no problem with liquidity.”
Lotte said, “Lotte Chemical has secured available liquidity funds of 4 trillion won as of last month, so there is no problem in repaying the principal and interest of corporate bonds. We will announce the convening of a meeting of bondholders this week and plan to hold a meeting of bondholders next month to adjust special terms.” It was said.
Meanwhile, Lotte Group will hold a corporate information session for institutional investors on the 26th to completely calm market anxiety. Major affiliates such as Lotte Chemical, Lotte Engineering & Construction, Hotel Lotte, and Lotte Shopping will participate in the briefing session.
Reporter Shin Jong-mo [email protected]
Considering the potential impact of Lotte Group’s planned asset re-evaluation next year, what specific financial ratios and metrics should investors carefully monitor to assess the effectiveness of this strategy in strengthening Lotte’s overall financial position?
## Interview with Lotte Group Experts: Debunking Rumors and Addressing Market Concerns
**Introduction:**
Welcome to our in-depth discussion on the recent rumors surrounding Lotte Group’s financial stability. We have with us today [Guest 1 Name & Title, e.g., Financial Analyst specializing in Korean Conglomerates] and [Guest 2 Name & Title, e.g., CEO of a Market Research Firm focused on the Retail Sector]. Both experts bring valuable insight intoevaluating the claims made and understanding Lotte Group’s response to quell market anxieties.
**Section 1: The Rumor Mill and Lotte’s Response**
* **For both guests:** The article highlights the rapid spread of rumors about Lotte Group facing a potential financial crisis. What makes this type of information so easily disseminated, and why might it be particularly pervasive regarding large conglomerates like Lotte?
* **Guest 1:** How credible do you find the source of this information – the “Jirashi” - considering Lotte’s immediate and strong denial? What are some red flags that investors and the public should be aware of when encountering such claims?
* **Guest 2:** Lotte Group has highlighted their substantial assets and liquidity. Do you agree with their assessment? What are some key financial indicators investors should focus on when evaluating a company’s overall financial health, especially in a challenging economic environment?
**Section 2: Performance of Lotte’s Core Businesses**
* **Guest 1:** The article mentions challenges faced by Lotte Shopping and Lotte Chemical. How typical are these findings within their respective industries? Do Lotte’s specific challenges differ from those faced by its competitors?
* **Guest 2:** Lotte Group emphasizes their long-term investment strategies regarding acquisitions and ventures like Joonggonara and Hanssem. How do you assess the risk-reward profile of these investments, considering both short-term performance and potential long-term growth?
**Section 3: Lotte’s Strategy for Building Confidence**
* **For both guests:** Lotte Group is taking proactive steps to reassure investors, including holding a corporate information session for institutional investors. What are your thoughts on the effectiveness of such measures? What other actions could Lotte Group take to restore market confidence?
* **Guest 1:** Lotte Chemical’s corporate bond issue has been highlighted as a potential point of concern. How does this situation reflect broader trends in the corporate bond market, especially within the chemical industry?
* **Guest 2:** Lotte Group plans to re-evaluate its assets next year. How significant could this re-evaluation be in terms of impacting their debt ratios and overall financial position?
**Closing Remarks:**
We thank our esteemed guests for shedding light on this complex issue.
It’s important to remember that rumors can often spread faster than facts, creating unnecessary market volatility.
By encouraging open dialog, critical analysis, and a reliance on credible sources, we can navigate these challenging situations and make informed decisions.
