SM Entertainment, Q4 Profitability Up... "Opposed to HYBE M&A"

Operating Profit in Q4 Last Year Up 70% Year-on-Year
Strong Album Sales from NCT Dream, Red Velvet, and Others
Concert Performance Reflects 35 Shows Including Super Junior
Repeated Opposition Expressed to HYBE Acquisition

[Asia Economy Reporter Kwangho Lee] SM Entertainment (SM Enter) recorded an operating profit of 25.2 billion KRW in the fourth quarter of last year, a 70% increase compared to the previous year. It is being evaluated as an earnings surprise.

On the 20th, SM Enter announced in its earnings release and corporate briefing conference call that its sales in the fourth quarter of last year reached 256.4 billion KRW, and operating profit was 25.2 billion KRW. The market expectations were sales of 227.1 billion KRW and operating profit of 19.5 billion KRW. The total sales for last year were 848.4 billion KRW, and operating profit was 93.5 billion KRW, representing a 38.5% increase compared to 2021.

Operating performance improved due to balanced growth across all business divisions. However, net profit for last year recorded 89.1 billion KRW, down 33.1% from the previous year. Regarding this, SM Enter explained, “A reverse base effect occurred due to non-operating one-time income in the previous fiscal year.”

On a separate basis, fourth-quarter sales increased by 26% year-on-year to 151.1 billion KRW. Album sales of NCT Dream and Red Velvet showed strong performance. Thirty-five concerts by NCT and Super Junior were reflected in the results.

Subsidiaries also posted strong results. Dream Maker’s sales increased by 207%, and due to growth of the Japanese subsidiary and SM Life Design, major subsidiaries recorded sales of 136.3 billion KRW. SM Enter stated that the improvement in album and concert revenues is expected to continue in the first half of this year.

Regarding the much-discussed merger and acquisition (M&A) with HYBE, SM Enter reiterated its opposition. Jang Cheol-hyuk, SM’s Chief Financial Officer (CFO), said, “HYBE did not go through consultation with management and the board of directors, nor did they conduct due diligence,” adding, “K-pop fans could suffer significant damage from monopolization, and there is concern that SM’s business scale could shrink.”

He then mentioned SM Enter’s new vision, ‘SM 3.0.’ CFO Jang added, “We will present specific business performance goals for ‘SM 3.0,’ overseas strategies, investment strategies, and performance and stock goals including subsidiaries before HYBE’s tender offer application.” This means the company plans to reemphasize its future vision before HYBE’s tender offer application date (March 2).

Meanwhile, SM Enter expects this growth trend to continue in the first half of this year as well. This is because Super Junior and member Yesung’s full-length albums, GOT the Beat’s mini-album, and NCT127 and SHINee’s Key’s repackaged albums were released in the first quarter of this year. In the second quarter, releases are scheduled for aespa and SHINee’s full-length albums, NCT units’ mini-albums, concerts by TVXQ and NCT Dream, aespa’s Japan concert, and concerts by NCT, BoA, Key, Red Velvet, and Taeyeon.

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