Lotte Chilsung Beverage(005300) said on the 5th that second-quarter operating profit on a consolidation basis fell 10.4% to 55.8 billion won. Revenue rose 2.4% to 1.1129 trillion won from a year earlier.
In the beverage business, second-quarter standalone revenue rose 1.7% year over year to 500.5 billion won. Operating profit fell 13.2% to 20.5 billion won. With sluggish domestic consumption persisting, higher exchange rates and geopolitical tensions in the Middle East drove up materials and supplies prices and logistics costs, which appears to have weighed on profitability.
By category, sports drink revenue increased 8.5%, helped by early heat and more outdoor activities. Carbonated drink revenue rose 3.1% on demand for zero-calorie drinks and seasonal peak effects, and coffee drink revenue increased 4.1% on demand for ready-to-drink (RTD) coffee and new product sales.
Beverage export revenue increased 9.8% on strong sales of Milkis, Let's Be, and aloe juice. Lotte Chilsung Beverage exports beverage products to more than 50 countries, including the United States, Russia, Europe, and Southeast Asia.
Profitability in the liquor business improved significantly. Second-quarter standalone revenue was 195.1 billion won, up 3.2% from a year earlier, and operating profit rose 156.6% to 7.5 billion won.
RTD liquor revenue, led by Soonhari Jin, jumped 143.3%, driving top-line growth. Soju revenue increased 1.9% on higher sales of Cheoum-Cheoreom and Saero. Wine revenue rose 8.8%, helped by expanded sales channels to big-box stores, restaurants, and bars. Cheongju revenue also increased 1.8% as sales of Soubok One Cup grew.
Including overseas subsidiaries in the Philippines, Pakistan, and Myanmar, second-quarter revenue in the global business rose 3.4% year over year to 458.5 billion won. Operating profit, however, fell 27.0% to 26.1 billion won.
Rising materials and supplies prices and higher logistics costs due to high oil prices and geopolitical tensions appear to have reduced profitability at overseas subsidiaries. Overseas subsidiaries account for about 41% of total revenue. Including export results, the global business share reaches about 47%.
Lotte Chilsung Beverage plans to boost management efficiency by reducing materials costs and expanding its sales network in response to higher prices for key materials such as cans and PET bottles. It set targets of 4.1 trillion won in revenue on a consolidation basis and 200 billion won in operating profit for this year.
Cumulative revenue for the first half of this year rose 3.4% from a year earlier to 2.0654 trillion won. Operating profit increased 18.6% to 103.6 billion won.
An official at Lotte Chilsung Beverage said, "In the second quarter, external variables such as high inflation, rising raw material prices, and global logistics cost burdens worsened, creating difficulties in terms of profitability," and added, "We maintained revenue growth on the back of growth in the liquor business and RTD product lineup, and expanded beverage exports."