[Click eStock] Kumho Petrochemical's Poor Performance; Industry Recovery Expected from 4Q

Industry Downturn and Regular Maintenance Impact Performance
Recovery in NB Latex Market Key to Rebound

Kumho Petrochemical posted disappointing second-quarter results that fell short of market expectations, due to an industry downturn and regular maintenance. The company is aiming for a rebound in performance after the resolution of tariff uncertainties.

On August 4, Shinhan Investment Corp. maintained its 'Buy' rating and a target price of 160,000 won for Kumho Petrochemical, citing these factors. The previous trading day's closing price was 115,900 won.

In the second quarter of this year, Kumho Petrochemical recorded sales of 1.7734 trillion won and an operating profit of 65.2 billion won. These figures represent a decrease of 4.3% and 45.3%, respectively, compared to the same period last year. In particular, operating profit dropped to nearly half of the previous quarter, indicating poor performance. It also fell significantly short of the market consensus of 75.7 billion won.

The sharp decline in operating profit from the synthetic rubber division, which plummeted by 82% quarter-on-quarter to 8.5 billion won, was a major factor. Although the price of styrene butadiene rubber (SBR) only fell by 3-4% due to solid demand despite a sharp drop in raw material (BD) prices, the poor performance of NB latex had a significant impact. Intensified competition led to a price drop of about 10%, and the spread (the difference between product and raw material prices) also declined by 15%, resulting in a significant decrease in profitability.

In the synthetic resin division, product prices fell by about 5%, but thanks to a robust ABS (acrylonitrile butadiene styrene) spread, operating profit increased by 2% quarter-on-quarter to 5.3 billion won. The phenol derivatives division recorded an operating loss of 2.3 billion won due to decreased sales volume and lower prices for major products. For EBDM (high value-added rubber), the spread increased by 7%, but due to regular maintenance and initial operating costs for new facilities, operating profit fell by about 37% quarter-on-quarter to 15 billion won. The other and energy division also saw profit fall by 11.2% quarter-on-quarter to 38.7 billion won, despite an increase in SMP (system marginal price), due to the impact of regular maintenance.

However, there is an assessment that the possibility of improved performance is emerging as tariff uncertainties are reduced. Shinhan Investment Corp. expects a meaningful recovery in the industry, particularly in synthetic rubber, starting from the fourth quarter. Lee Jinmyung, a senior researcher at Shinhan Investment Corp., explained, "With the large-scale deficit in NB latex, which accounts for 25% of synthetic rubber sales in the first half of this year, shrinking each quarter, performance improvement will accelerate," adding, "The company still maintains the most robust fundamentals within the industry."

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