[Click eStock] "Lotte Food, 2Q Outlook Exceeding Expectations"

Profitability Improvement Due to Base Effect and Demarketing Impact

[Asia Economy Reporter Minwoo Lee] Lotte Food is expected to post earnings for the second quarter of this year that exceed market consensus. This is attributed to increased volume driven by price hikes based on strong market dominance and a base effect following last year's slowdown.

On the 17th, Daishin Securities forecast that Lotte Food will record consolidated sales of 466.4 billion KRW and operating profit of 20.5 billion KRW for the second quarter of this year. These figures represent increases of 6% and 46%, respectively, compared to the same period last year. Compared to the previous quarter, sales and operating profit are estimated to rise by 13% and 90%, respectively. The operating profit is expected to surpass the consensus estimate of 17 billion KRW by more than 10%, indicating strong performance.

Specifically, ice cream sales are projected to increase by only 1% year-on-year due to lower temperatures and more rainy days during April and May compared to the previous year. Due to increased marketing expenses for key products, operating profit for the second quarter is expected to remain at last year's level.

Sales in the food ingredient distribution and meat processing sectors are expected to decline by 1% and 4%, respectively, compared to the same period last year. This is analyzed as a result of 'demarketing' efforts to reduce customer demand among low-profit clients. However, profitability improvement is expected to be noticeable.

Sales of processed oils and fats are forecasted to grow by approximately 15% year-on-year. This is due to the ability to raise prices based on a 70% market share in the B2B oil market, as well as a base effect from reduced B2B demand caused by last year's downturn in the dining-out industry.

Han Yujeong, a researcher at Daishin Securities, explained, "Based on the strong market position in the B2B oil market, price pass-through in response to raw milk price fluctuations will continue. Demarketing in the food ingredient and meat processing sectors is expected to persist throughout the year, so the external growth rate this year is expected to be around 5%. However, if improvements in profitability through enhanced profit structure are confirmed, it is necessary to recognize the significance of fundamental improvements from a long-term perspective."

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