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KOLMAR KOREA and COSMAX Q3 Performance Slump

[Asia Economy Reporter Yujin Cho] Due to the COVID-19 pandemic, the two largest domestic cosmetics original design manufacturing (ODM) companies are struggling with poor performance. The recession caused by COVID-19 has led to a decline in adventurous consumption, resulting in fewer orders for new product launches and consequently poor earnings.

On the 17th, Korea Kolmar announced that its consolidated sales for the third quarter of this year amounted to 317.6 billion KRW, a 1.40% decrease compared to the same period last year, while operating profit increased by 4.93% to 18.9 billion KRW. The collapse in demand due to the COVID-19 impact led to a deterioration in domestic sales. A Korea Kolmar official explained, "The prolonged COVID-19 situation caused a decrease in orders from major clients, leading to a drop in sales. However, operating profit increased due to a portfolio strategy focused on high-margin basic lines such as eye cream and soothing gel, along with cost-cutting efforts in preparation for worsening business conditions."

Earlier, on the 13th, Cosmax, which also announced its earnings, posted results that fell short of expectations. Cosmax's third-quarter sales were 320.7 billion KRW, a mere 1.02% increase year-on-year, while operating profit rose 33.65% to 14 billion KRW. Sales of high-margin hygiene products like hand sanitizers, which had driven performance, declined by double digits quarter-on-quarter due to intensified price competition.

Lockdowns in Indonesia and Thailand, which were severely affected by COVID-19, order delays, and export restrictions on hand sanitizers also negatively impacted overseas business performance. Cosmax owns its own factories in South Korea, China (Shanghai, Guangzhou), Indonesia, Thailand, and the United States (Ohio, New Jersey).

As the COVID-19 recession deepened, demand for cosmetics itself collapsed due to mask-wearing, and the number of new product launches sharply decreased, leading to reduced orders from major clients. An ODM company official said, "This year, the number of new product launches by major cosmetics brands has dropped to about one-tenth compared to last year. After COVID-19, offline market demand collapsed, causing a significant decline in orders from road shop-based brand shops. Additionally, with mask-wearing becoming routine, demand for color cosmetics such as foundation and lipstick has also collapsed."

Given that consumption in China, the largest overseas market, is rapidly rebounding, the outlook for the fourth quarter is positive. Korea Kolmar is seeing increased order volume and operating rates due to new orders from its Wuxi and Beijing subsidiaries in China. Cosmax is intensifying efforts to secure new orders by eliminating the 'minimum order quantity' of over 10,000 units for online companies and others. An ODM company official stated, "We expect a performance rebound in the fourth quarter due to co-growth with our largest client's expansion into China and securing volumes from online customers within China."

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