CJ ENM, Expecting Improved Performance in Second Half Despite Weakness in Key Businesses

Media and Film Business Slump Leads to 36% Cut in This Year's Operating Profit Estimate
Brokerage Firms Say "Performance Improvement Through Strengthening Digital Division and Cost Reduction"

[Asia Economy Reporter Minji Lee] Although the impact of the novel coronavirus infection (COVID-19) has made the poor performance of CJ ENM's major businesses in the media and film sectors more visible, there are opinions that improved results will be presented in the second half of the year through strengthening the digital division.

According to KB Securities on the 30th, the company's operating profit estimates for this year and next year were reduced by 36% and 26%, respectively, compared to previous estimates. This judgment is based on the expectation of poor performance in the media and film sectors due to the impact of COVID-19.

The media sector is expected to be negatively affected by the downturn in the advertising market, and the film sector by the sharp decline in box office sales. In fact, CJ ENM's TV advertising revenue in the first quarter decreased by 30.7% compared to a year earlier, and the film sector shrank by about 42%.

Researcher Dongryun Lee of KB Securities said, “Considering the impact of COVID-19, we lower the sales estimates for the media and film business sectors this year by 18% and 13%, respectively, compared to previous estimates,” adding, “The contraction of the advertising market and the sluggish offline economy have become more prominent.”

However, the securities industry expects that strengthening the digital business division and commerce business will enable favorable growth in the second half of the year. The digital sector is expected to deliver positive results due to increased traffic on YouTube and TVING. The company is showcasing various content through Dia TV and the digital studio tvN D, and is utilizing this influence as part of its advertising marketing solutions.

Researcher Minha Choi explained, “The commerce sector will continue its profit improvement trend by restructuring the portfolio with a focus on profitability,” and added, “In the second half of the year, growth will be driven mainly by the digital business.”

The fact that the company has undertaken structural improvements focusing on profitability was also cited as a positive factor. CJ ENM has initiated cost efficiency measures in the core media business, considering the decline in advertising revenue. This year, it plans to reduce media production costs by 10-15% and increase cross-programming to minimize the impact.

Researcher Dongryun Lee explained, “Considering the shift in business direction focusing on profitability, operating profit is expected to improve from 104.3 billion KRW in the first half to 130.9 billion KRW in the second half,” and added, “Operating profit in 2021 is expected to reach 307.5 billion KRW, a 30% increase compared to the previous year.”

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