Amorepacific, the Background of the 160 Billion Won Building Sale

[Asia Economy Reporter Yujin Cho] Amorepacific is drawing attention to the background of its move to secure liquidity by selling the Seongam Building located in Nonhyeon-dong. Analysts interpret this decision as an effort to improve profitability by reducing non-core assets amid the domestic cosmetics market's ongoing downturn.

According to the Financial Supervisory Service's electronic disclosure system on the 26th, Amorepacific Group announced that it sold the Seongam Building in Nonhyeon-dong, Seoul, for 160 billion KRW. The disposal amount accounts for 2.17% of total assets (based on consolidated figures as of the end of 2018), and the scheduled disposal date is April 29.

The Seongam Building, a nine-story building on a 3,258㎡ site, is an aging building completed in 1985. The building's use became obsolete after subsidiaries such as Amos Professional and Estra, which were housed there, relocated to the new Yongsan headquarters in 2018, which is the apparent reason for this sale.

The securities industry views this as part of cost-cutting efforts to improve profitability. Amorepacific, which operates over 40 brands including Sulwhasoo, Hera, and IOPE, reported an operating profit of 427.8 billion KRW on a consolidated basis last year, down 11.2% from the previous year. This is about half of the 848.1 billion KRW recorded at its peak in 2016. During the same period, sales increased by 5.7% to 5.58014 trillion KRW, but net income plunged 37.2% to 210.4 billion KRW.

Amorepacific’s operating profit has halved compared to its peak in 2016, continuing a three-year streak of poor performance. The Chinese business, which was a growth driver, has remained sluggish due to the THAAD impact, and the domestic market has not recovered from its downturn, exacerbating profitability deterioration. Amorepacific has focused on improving profitability by emphasizing cost reduction in both domestic and overseas operations since last year.

An industry insider said, "Since last year, to improve profitability and reduce costs, the company has been cutting unnecessary selling and administrative expenses through offline store restructuring," adding, "This building sale also appears to be a strategy to secure financial soundness by disposing of non-core assets."

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