[KCC]
[KCC]

Q2 sales reach 1.81 trillion won, operating profit 128.9 billion won

Insulation volume growth lifts building materials sales and margins

Silicone price and volume gains drive company-wide earnings improvement

KCC posted improved earnings in the second quarter, buoyed by non-residential construction demand from semiconductor clusters and data centers even as the housing market remained sluggish. The standout contributor was Momentive, the US silicone maker KCC acquired, which delivered a notable turnaround. Insulation sales volumes also rose. The company said it expects insulation demand to pick up further in the second half, pointing to stronger earnings improvement than in the first half.

KCC said Friday its consolidated second-quarter sales reached 1.81 trillion won ($1.27 billion), up 12.2 percent quarter-on-quarter. Operating profit rose to 128.9 billion won, a 37.6 percent increase over the same period. The silicone business led the earnings recovery. "The silicone segment contributed to company-wide profitability improvement on the back of price increases and demand growth," the company said. "The paint segment faced continued raw material cost pressure but maintained steady sales on stable demand."

Domestically, the building materials business performed well. Despite the ongoing housing market downturn, the segment's second-quarter sales and margins improved quarter-on-quarter, with expanded insulation sales volumes underpinning the gains. The insulation business has been weighed down by weak demand and higher fixed costs from capacity additions, but the company said that if industrial-use volumes continue to grow, rising utilization rates could drive further margin improvement.

KCC is also looking beyond housing for second-half growth. The company said it sees potential for additional earnings improvement from higher insulation volumes if demand materializes from semiconductor clusters — part of the government's "three mega projects" worth hundreds of trillions of won — as well as from data centers and public housing.

The pace of housing market recovery remains a variable. "For PVC windows, rising raw material costs in the second quarter increased cost pressure, but this was partly offset as the higher volume of home transactions recorded last year fed through to demand with a lag," KCC said. Given the nature of the business — where interior renovation and window replacement demand typically follows home sales — changes in transaction volumes tend to show up in earnings after a delay.

Oil prices and utility costs are additional variables for the building materials business in the second half. Despite the potential for non-residential demand expansion from semiconductor clusters and data centers, KCC said it is taking a conservative view of its second-half outlook, factoring in the pace of housing market recovery and raw material prices.

The paint business posted higher second-quarter sales quarter-on-quarter, supported by stable demand from downstream industries including automotive and shipbuilding. However, continued raw material cost pressure from geopolitical risks meant margin improvement lagged behind the sales increase. KCC said it is working to reduce cost burdens by improving procurement terms and diversifying its supplier base.

The silicone segment was the single largest contributor to company-wide profitability improvement in the second quarter, the company said. Both sales volumes and selling prices rose quarter-on-quarter as price increases and demand recovery reinforced each other. Factory operational efficiency gains and cost reductions also contributed to improved margins. Supply-side conditions in the silicone market are also improving. "The oversupply burden in the organosilicone market is gradually easing as Chinese producers continue to cut output and global competitors restructure their businesses," KCC said.


hong@heraldcorp.com