CJ CheilJedang posts 10% sales growth in Q2, but operating profit falls 18%

Products tied to CJ CheilJedang's brand intellectual property [CJ CheilJedang]

CJ CheilJedang said Tuesday its second-quarter sales, excluding subsidiary CJ Logistics, rose 10.2 percent year-on-year to 4.19 trillion won ($2.95 billion), while operating profit fell 18.4 percent to 161.9 billion won over the same period.

On a consolidated basis including CJ Logistics, sales climbed 9.5 percent to 7.36 trillion won, while operating profit dropped 18.5 percent to 257.6 billion won.

The food business division posted sales of 2.84 trillion won, up 5.8 percent, and operating profit of 70.9 billion won, down 21.3 percent. Overseas sales of global strategic products, or GSPs — including mandu and Hetbahn — expanded, while new products drove modest growth in the domestic market. Profitability softened amid persistent weakness in domestic demand, as high oil prices pushed up packaging costs and raw material prices rose.

GSPs also led growth in the overseas food business, which generated sales of 1.51 trillion won. The Americas segment grew by double digits, up 10 percent, on stronger mandu and Hetbahn sales through mainstream retail channels. Europe rose 19 percent on solid sales of mandu, chicken and noodle products. The Asia-Pacific region advanced 21 percent, driven by expanded sales of ambient and frozen products including mandu, rolls and dried seaweed. China grew 5 percent on the back of mandu and frozen rice ball sales.

Domestic food sales edged up 1.4 percent to 1.34 trillion won. The ingredients business faced headwinds from higher costs tied to the weak won and falling selling prices, though strong sales of new health and wellness products partially offset those pressures.

The biotech division posted sales of 1.35 trillion won, up 20.8 percent, and operating profit of 91 billion won, down 15.9 percent. Sales growth was driven by expanded sales of specialty amino acids such as arginine and isoleucine, as well as key products including lysine. Profitability eased due to intensifying market competition in tryptophan, a high-margin product, and an unfavorable base effect from a strong earnings period a year earlier — though operating profit rose 85.5 billion won quarter-on-quarter.

Meanwhile, the company recorded a net loss of 23.9 billion won, reflecting non-operating losses including foreign exchange transaction losses and derivative valuation losses stemming from a rise in exchange rates and grain prices.

Starting in the third quarter, CJ CheilJedang plans to sharpen its strategic execution based on a recent business division rebalancing. The lifestyle food division will focus on expanding GSP sales and defending profitability in the domestic market through a high-margin category strategy. The technology and materials division will pursue new business growth, while the core materials division aims to accelerate earnings improvement in the second half by capitalizing on shifts in the external environment.

"We will accelerate the expansion of K-food into new global markets, led by global strategic products such as mandu and Hetbahn, and focus on improving profitability through broader biotech sales and reductions in manufacturing costs and fixed expenses," a company official said.

andy@heraldcorp.com