DuPont settlement to boost Kolon’s profits: analysts

South Korean textile and chemical company Kolon Industries is expected to see profits rise this year thanks to its legal settlement with global giant DuPont last week over the alleged theft of company trade secrets, analysts in Seoul said Monday.

Kolon’s yearly operating profits are likely to rise by 53.4 percent to reach some 258.9 billion won ($239 million) this year due to improved business conditions, according to Meritz Securities.

Last Thursday, Kolon pleaded guilty to the charge of conspiring to steal propriety information about DuPont’s trademark product Kevlar, a type of aramid fiber used to manufacture tires and bulletproof vests, according to the U.S. Department of Justice.

The Korean company also agreed to pay DuPont $275 million in restitution as part of a settlement that included up-front and ongoing payments, as well as $85 million in criminal fines.

The fee is much smaller than the $920 million in compensation that a U.S. District Court in Virginia ordered Kolon to pay in 2011. The ruling was overturned by a federal appeals court last year.

“By reaching an agreement, Kolon has removed uncertainty about the potential costs and payments involved with the legal case,” said Hwang Yoo-sik, an analyst at Meritz Securities.

“The company can now save some 40 billion won in attorney fees annually and plan out its business for the year with more certainty,” Hwang said.

Moreover, the Meritz analyst forecast Kolon’s aramid business to act as a new growth engine, as the settlement allows the company to freely expand and develop its brand Heracron.

Kolon jumped into the aramid business in 2005, entering a market that had been dominated mostly by DuPont and Japanese chemical firm Teijin.

In 2009, DuPont sued Kolon, alleging that the Korean firm stole trade secrets about DuPont’s Kevlar fiber from former DuPont employees. Kolon denied the charges, arguing that some of DuPont’s trade secrets had long been in the public domain.

The legal battle continued for six years until last week’s final settlement in a federal court in Alexandria, Virginia.

By Sohn Ji-young (jys@heraldcorp.com)