[Click e Stocks] Nexen Tire, Cost Structure Is a Weakness

[Asia Economy Reporter Junho Hwang] Korea Investment & Securities maintained a neutral investment opinion on Nexen Tire on the 18th. Although demand in the North American market has increased, the burden of transportation costs has also grown, making it difficult to see an improvement in performance.

Nexen Tire achieved sales of 505.5 billion KRW in the second quarter of this year, a 60.6% increase compared to the previous year. Operating profit (OP) turned positive at 12.5 billion KRW, and net profit (NP) also recorded 9.6 billion KRW, successfully posting a profit.

However, these second-quarter results fell short of market expectations. The biggest reason was the increase in transportation costs. While price hikes offset the rise in raw material costs, the company could not bear the transportation costs. Transportation expenses in the second quarter reached 64.3 billion KRW (52.1 billion KRW in the first quarter), nearly tripling compared to 23.3 billion KRW last year.

Jinwoo Kim, a researcher at Korea Investment & Securities, analyzed, "Due to the high export ratio, the impact of transportation costs was greater compared to domestic competitors who recorded strong performance. In particular, the company is responding to the strong demand in the North American market entirely through exports without a local factory, and the burden of transportation costs is expected to increase in the second half of this year as well."

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