[Click eStock] Lotte Chilsung's 1Q Operating Profit Down 17% YoY... Urgent Need for End of COVID-19

Alcohol Sales Down 30% Year-on-Year... Operating Losses Continue

[Asia Economy Reporter Minwoo Lee] Lotte Chilsung's sales and operating profit for the first quarter of this year are both expected to decrease by more than 10% compared to the same period last year. This is due to sluggish performance in both the beverage and liquor sectors caused by the economic slowdown resulting from the COVID-19 pandemic.

On the 22nd, Cape Investment & Securities forecasted that Lotte Chilsung would achieve consolidated sales of 506.9 billion KRW and operating profit of 16 billion KRW in the first quarter of this year. Sales are expected to decline by 11.8% and operating profit by 16.7% compared to the first quarter of last year. It is considered a direct hit from COVID-19.

In particular, the liquor sector experienced a significant drop in sales. It is projected to reach only 138.2 billion KRW, down 30.4% from the same period last year. The operating losses that have continued since the third quarter of last year are also expected to persist. Hye-mi Kim, a researcher at Cape Investment & Securities, explained, "It is understood that not only the impact from COVID-19 but also the high base from the previous year and business-related restructuring activities to improve efficiency have influenced this."

The beverage sector is also struggling. Sales are estimated to have decreased by 1.8% and operating profit by 9.3% compared to the same period last year. As social distancing measures continue, this trend is expected to persist into the second quarter. However, given the seasonal nature of the business, if COVID-19 ends before the peak season in the third quarter, performance in the second half of the year could improve. Researcher Kim stated, "Since the declaration of the COVID-19 pandemic, prices of crude oil and sugar have dropped significantly, and considering the lagging time, cost improvements are likely to occur as we move into the second half of the year."

Accordingly, Cape Investment & Securities has issued a 'Buy' rating for Lotte Chilsung. However, the target stock price was lowered by 24% to 130,000 KRW. The closing price on the previous day was 98,300 KRW.

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