[Click eStock] "Kolon Industries, Q1 Profitability Expected to Decline"

[Asia Economy Reporter Minji Lee] KB Securities explained on the 21st that Kolon Industries (Kolon Industry) is expected to report lower operating profit in the first quarter of this year than anticipated. This is due to the decline in operating rates at its Chinese factories caused by the impact of the novel coronavirus disease (COVID-19).

Kolon Industries recorded sales of 1.1327 trillion KRW and an operating profit of 11.3 billion KRW in the fourth quarter, down 8.4% and 68.6% respectively compared to the same period last year. The operating profit was significantly below the market expectation of 62.4 billion KRW.

A KB Securities analyst said, "Profits from industrial materials decreased due to weak demand in the downstream industries," adding, "The profitability of the chemical business declined due to capacity expansions by competitors, and one-time costs such as performance bonuses and affiliate expenses were reflected."

The operating profit from industrial materials in the fourth quarter was 4.9 billion KRW, down 76% year-on-year. The decrease in PET tire cord selling prices and sales volume led to a profit decline, and the performance of subsidiaries Namkyung Corporation and Kolon Glotech worsened due to weak demand in the Chinese automobile market.

The operating profit from films and electronic materials in the fourth quarter turned positive to 4.2 billion KRW compared to the same period last year. This was due to improved profitability of PET films following raw material price declines and continued growth in CPI film sales. However, the operating profit was lower than market expectations due to the depreciation of the KRW against the USD and one-time costs related to affiliates.

The operating profit in the chemical business segment was 11.4 billion KRW, down 42% year-on-year. The average selling price of petroleum resins declined, and operating profit fell short of expectations due to the reflection of regular maintenance costs.

Kolon Industries is expected to post weaker results in the first quarter compared to last year. The analyst said, "Operating profit from industrial materials in the first quarter is expected to increase compared to the previous quarter due to the disappearance of one-time costs, but concerns over declining operating rates in China have grown due to the spread of COVID-19."

He added, "Operating profit from films and electronic materials in the first quarter is also expected to improve due to increased sales of foldable phones this year, but it will be affected by the operating rate and profitability of the Hezhou film factory in China."

This content was produced with the assistance of AI translation services.