Korea Kolmar and Cosmax's Chinese Factories Resume Normal Operations After COVID-19 Halt

[Asia Economy Reporter Yujin Cho] The Chinese factories of South Korea's top two cosmetics original design manufacturing (ODM) companies, which had been halted due to the COVID-19 pandemic, have successfully returned to normal operations just one month after restarting. As large shopping malls in major Chinese cities begin to reopen, market demand is also reviving.

According to industry sources on the 19th, Kolmar Korea and Cosmax fully resumed operations at their major production bases in China last week. This came about a month after restarting factories around February 10, following an extended Lunar New Year holiday caused by the COVID-19 situation. A Kolmar Korea official explained, "Since the 9th, all production lines have resumed operations, achieving full capacity compared to production plans." Kolmar Korea owns its own factories in Beijing and Wuxi, while Cosmax has factories in Shanghai and Guangzhou.

As of February 10, the worker return rate at both companies was only around 50-70%, leaving an insufficient number of employees to operate the factories. The Chinese government imposed movement restrictions by locking down about 70 cities, blocking workers from returning to their workplaces after the Lunar New Year holiday. A Kolmar Korea official stated, "As of the 9th, 100% of workers at the Wuxi factory have returned, and 95% of employees at the Beijing factory have come back." A Cosmax official said, "As of the 11th, most workers have returned."

The faster production recovery compared to other industries such as automotive or IT was attributed to the unique characteristics of consumer goods. A Cosmax official said, "Since the factories are located near coastal areas rather than inland, raw material supply was relatively smooth, and the demand collapse in the consumer goods industry was not severe, which led to a quick production recovery." Major shopping centers in large cities like Shanghai's Jing'an District, which had been closed due to the COVID-19 situation, have recently reopened, reviving market demand.

However, due to more than a month of disrupted operating days, a decline in first-quarter profits is inevitable. The reduction in operating days at Chinese factories is expected to significantly decrease the profits of the Chinese subsidiaries. According to financial information provider FnGuide, Kolmar Korea's operating profit for the first quarter of this year is estimated at 29.4 billion KRW, a 7.26% decrease compared to the same period last year. During the same period, Cosmax's operating profit is estimated to have dropped 28.15% to 9.7 billion KRW.

The industry expects that it will take more time for the demand collapse triggered by the COVID-19 situation to fully recover. Kolmar Korea plans to accelerate the transfer of production volume from the Beijing factory to the more efficient Wuxi factory to achieve early performance improvement. A Kolmar Korea official explained, "The Chinese subsidiary inevitably faced sales disruptions due to a month of halted production, but we are focusing on normalizing orders and production in line with China's economic recovery in the second quarter."

KOLMAR Korea Wuxi Factory

COSMAX Guangzhou Factory

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