CJ Cheiljedang’s Q2 net plunges on higher cost, weak domestic demand
SEOUL-- CJ Cheiljedang Corp., South Korea's leading food manufacturer, said Friday its net profit dropped 40.1 percent in the second quarter from a year earlier, mainly due to increased production costs and weak domestic demand.
Net income came to 43.1 billion won (US$38.31 million) on a consolidated basis in the April-June period, down from 71.9 billion won posted a year earlier, the company said in a regulatory filing.
Its operating profit declined 21.9 percent on-year to 164.4 billion won while sales grew 8.29 percent to 3.9 trillion won over the period.
CJ Cheiljedang cited an increase in raw material prices, such as raw sugar and soybeans, as the main reason for weakened profitability in the second quarter. The production of food materials like condiments is one of the company's founding businesses that started operations in 1953.
The company said its sales of processed food, meanwhile, increased due to strong growth of new products and overseas businesses.
In recent years, CJ Cheiljedang has been focusing on manufacturing processed foods and food additives, both of which are faring well on the back of robust consumer demand for instant meals.
Its mainstay food manufacturing unit basked in 1.18 trillion won in sales, up 7.1 percent from a year earlier, backed by growth of its instant frozen dishes, commonly referred to as home meal replacement (HMR) products, the company said.
Sales in the biotech division, responsible for developing food additives, also gained 2.9 percent to 469.2 billion won, with the figure for the biotic resources unit that is mainly focused on animal feed, rose 4.4 percent on-year to 544.6 billion won during the cited period, it added.
The company said it will bolster efforts to tap deeper into overseas markets to deal with weak domestic demand amid prolonged economic slowdown.
The affiliate of South Korea's food and entertainment conglomerate CJ has been expanding investment abroad, including Vietnam, taking over three local foods makers from the Southeast Asian country since February last year.
Shares of CJ Cheiljedang closed down 0.56 percent to 354,000 won on the main bourse on Friday, with the broader KOSPI index gaining 0.36 percent. The earnings were released after the stock market closed.
Source: Yonhap News Agency