"Struggled Abroad but..."… CJ CheilJedang Faces Inevitable First Half Slump

2Q Earnings Expected to Decline Due to Weak Domestic Food and Bio Sectors

CJ CheilJedang is expected to find it difficult to avoid a disappointing performance report for the first half of the year. While its overseas food business is struggling to defend its results, improvement in the domestic food and bio businesses will be necessary to support a rebound in performance in the second half.

CJ CheilJedang Headquarters Building Exterior

According to financial information provider FnGuide on the 5th, CJ CheilJedang's operating profit for the second quarter of this year is estimated to be 321.5 billion KRW, a 36.2% decrease compared to the same period last year. Sales for the same period are also expected to decline by 1.8% to 7.3809 trillion KRW.

The contraction in CJ CheilJedang's performance since the fourth quarter of last year is rooted in the sluggish domestic food and bio businesses. Due to the ongoing economic downturn throughout the first half, domestic food sales of processed and ingredient products are expected to decline in the second quarter as well. With poor sales, combined with rising costs and exchange rate burdens, a decline in profits seems inevitable.

As the domestic food business struggles, the burden on the overseas food business to compensate grows heavier. Fortunately, the overseas food business is navigating smoothly, centered on the U.S. In the U.S. market, which accounts for about 80% of overseas sales, sales of global strategic products (GSP) such as chicken, processed rice, and kimchi are steadily increasing, and market shares of pizza and dumplings remain solid. Lee Kyung-shin, a researcher at Hi Investment & Securities, predicted, “With rapid market responses such as the expansion of the Schwans pizza factory in May, the gap in market dominance with local competitors will further narrow.”

In Asia, where adjustments continue due to slowing consumption, CJ CheilJedang has taken decisive action. The company recently sold its entire 60% stake in its Chinese food subsidiary, Jishangju (吉香居), for about 300 billion KRW. Jishangju is a profitable company that sells Chinese side dishes and sauces, reporting a net profit of 26.1 billion KRW last year, but since it is unrelated to K-food brands like Bibigo, the company decided to sell it to focus on core areas. Following this sale, CJ CheilJedang’s China business will be centered around its subsidiary Qingdao Food, which produces and sells K-food including Bibigo.

While the overseas food business is expected to maintain a positive trend by continuously creating new momentum such as launching new K-street food products, the domestic business is also expected to gradually recover sales as consumer sentiment rebounds from its low point. Jo Sang-hoon, a researcher at Shinhan Investment Corp., said, “Although sales of relatively high-priced products are shrinking due to the recent economic downturn, the company will overcome this by emphasizing cost-effective products and products that can convert dining-out demand into home dining.”

For CJ CheilJedang to achieve a rebound in the second half, improvement in the bio business’s performance is also crucial. The bio business, which mainly produces amino acids for feed additives, continues to face sluggish conditions due to weak demand caused by the global livestock market downturn not yet fully recovering. This has led to reduced sales volume and falling prices of major products like lysine. However, specialty amino acids are showing growth, and lysine prices are rebounding, indicating that the overall market conditions are gradually improving.

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