Dongwon F&B, Q4 'Surprise' with Cost Reduction

[Asia Economy Reporter Jang Hyowon] Dongwon F&B recorded an operating profit in the fourth quarter of last year that exceeded the average market consensus. This is analyzed to be due to reduced expenses in advertising and promotions.

According to the Financial Supervisory Service's electronic disclosure on the 12th, Dongwon F&B announced that its consolidated operating profit for last year was tentatively estimated at 116.3 billion KRW, a 14.7% increase compared to the previous year. Sales increased by 4.62% year-on-year to 3.1703 trillion KRW, and net profit rose by 18.68% to 77.9 billion KRW.

Looking at the fourth quarter of last year alone, sales amounted to 732.1 billion KRW, a 2% decrease compared to the same period last year. On the other hand, operating profit was 19.4 billion KRW, a 17% increase year-on-year. This is 18.3% higher than the average operating profit forecast of 16.4 billion KRW by securities firms before the earnings announcement.

Sales in the seasoning distribution sector recorded 299 billion KRW, down 3% year-on-year due to the contraction of the dining-out industry caused by the escalation of social distancing measures amid COVID-19. Operating profit also decreased by 23% compared to the same period last year, recording 6.8 billion KRW.

In the general food sector, dairy product sales, which account for the largest sales proportion, decreased compared to the same period last year due to reduced convenience store traffic. On the other hand, sales of gift sets and canned tuna grew, and sales of home meal replacements (HMR) and canned ham increased by 20% and 30% respectively compared to the previous year.

General food sales are estimated to have decreased by 1% year-on-year to 382.9 billion KRW. However, operating profit is analyzed to have increased by 54% year-on-year to 11.7 billion KRW. The increase in operating profit is attributed to reduced costs in advertising, promotions, and marketing despite increased year-end labor costs.

Han Yujeong, a researcher at Daishin Securities, explained, “Feed costs are expected to rise by more than 20% in the first half of this year compared to the same period last year, so first-quarter profits are likely to be sluggish,” adding, “If cost burdens persist long-term, the possibility of price increases is considered high.”

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