CJ CheilJedang said on the 12th that, excluding CJ Logistics, it posted sales of 4.0271 trillion won and operating profit of 148.5 billion won in the first quarter. Sales rose 4.3% from a year earlier, but operating profit fell 26% over the same period.
◇ Japan dumpling market share tops double digits for the first time
According to CJ CheilJedang, the food business posted first-quarter sales of 3.0384 trillion won and operating profit of 143 billion won. They increased 3.9% and 11.2%, respectively, from a year earlier.
Overseas food business sales rose 4.5% on-year to 1.5555 trillion won. Global strategic products (GSP), including dumplings, drove growth. In the Americas, growth continued on the back of expanded sales of GSP such as dumplings and shelf-stable rice and higher pizza market share. Dumpling sales rose 15%, and shelf-stable rice sales rose 7%.
In Japan, boosted by the new Chiba plant that began operations in September last year, dumpling sales rose 17%, and market share topped double digits (11%) for the first time.
Europe and the Asia-Pacific each posted a strong 17% growth rate. In Europe, dumplings as well as chicken and noodles gained popularity, while in the Asia-Pacific, front-running dumplings, seaweed snacks, and shelf-stable products pushed sales up 32% and 31% year over year in Vietnam and Oceania, respectively.
Domestic food business sales were 1.4829 trillion won, up 3.2% from a year earlier. Processed food sales rose 9% on the back of Lunar New Year gift set effects and strong sales of new products tied to intellectual property (IP). IP-linked new products, including the Netflix "Culinary Class Wars" chef collection, drove sales growth. By contrast, the ingredients business, which manufactures and sells sugar, flour, oil, and starch, saw sales fall 7% due to price cuts and weaker soybean meal market conditions.
The bio business posted higher sales but saw profitability deteriorate sharply. Bio sales were 988.7 billion won, up 5.7% from a year earlier. However, operating profit was 5.5 billion won, down 92.4%. The operating margin fell to 0.6% in the first quarter from 7.7% a year earlier.
While increased sales volumes of key products such as specialty amino acids and nucleic acids fueled sales growth, price declines in high-margin products weighed on profitability. CJ CheilJedang said the share of specialty product sales rose from 11% in the first quarter of 2020 to 21% in the first quarter of this year.
In the securities market, prices of key products such as methionine and lysine have recently turned upward, but analysts expect improvement effects to be limited through the second quarter due to a time lag before they are fully reflected in earnings.
Ryu Eun-ae, an analyst at KB Securities, said, "Methionine is estimated to account for 10% of bio sales at CJ CheilJedang. Prices are rising more than 200% from previous levels due to reduced supply following shutdowns at some production facilities of major competitors in Asia," and added, "The extent of the pass-through to customers and the impact will likely be determined by the strength of pricing power and the terms of period contracts."
Including CJ Logistics, CJ CheilJedang's first-quarter sales were 7.1111 trillion won, down 1.4% from a year earlier. Operating profit fell 28.5% over the same period to 238.1 billion won.
◇ "Operating margin will reach 4% this year"
CJ CheilJedang plans to push for profitability improvement in the second quarter as well, focusing on its overseas food and bio businesses. In its earnings announcement that day, CJ CheilJedang said, "Excluding CJ Logistics, this year's sales will post a mid–single-digit growth rate, and the operating margin will be around 4%."
In the food business, the company will focus on expanding sales of GSP, including dumplings, in key overseas regions. In the Americas, it will run digital marketing and the "bibigo for it" campaign centered on dumplings and shelf-stable rice to raise brand awareness for Bibigo and push to expand the Asian food category. In Europe and the Asia-Pacific, it plans to strengthen lineups of core products such as dumplings, chicken, and noodles and expand entry into new channels.
In Korea, the company aims to increase products tailored to health-management trends such as high-protein and low-sugar, and expand sales of new products like "Sobaba Golden Holic." It plans to boost both growth and profitability through innovation of the online channel structure and expense efficiency.
The bio business will pursue a recovery in results centered on specialty products. Improvement in the price spread between soybean meal and corn could act as a positive factor for a recovery in demand for feed-use amino acids. The company plans to diversify feed-use demand for arginine and expand sales for food use, focusing on the North American sports nutrition market.
A CJ CheilJedang official said, "In the second quarter, we plan to accelerate the expansion of new K-food territories overseas by front-loading GSP, including dumplings, in major overseas regions," and added, "We will focus more on improving profitability through expanded bio sales and management efficiency."