CJ CheilJedang Improves Profitability by Selling Animal Feed Subsidiary [Click e-Stock]

On October 2, Korea Investment & Securities projected that the sale of CJ CheilJedang’s animal feed subsidiary, CJ Feed & Care (CJ F&C), would improve the company’s consolidated earnings profitability by enhancing its financial structure. The firm maintained its “Buy” rating and a target price of 320,000 won.

The previous day, CJ CheilJedang announced that it had signed a contract to sell CJ F&C to Royal De Heus, a Netherlands-based company, for 210.9 billion won. Royal De Heus is one of the world’s top 10 animal feed producers, operating in over 70 countries.

Korea Investment & Securities estimated that CJ F&C’s debt stands at about 800 billion won, and that the company was valued at between 1 trillion and 1.2 trillion won. Through this transaction, CJ CheilJedang will first receive 10.9 billion won, followed by 200 billion won over the next three years. Additionally, depending on whether certain “earn-out” conditions based on future performance are met, the company could receive up to an additional 350 billion won.

Kang Eunji, an analyst at Korea Investment & Securities, stated, “The sale of CJ F&C will reduce debt by approximately 800 billion won, improve the financial structure, and enhance consolidated earnings profitability through portfolio optimization. It is also positive that the sale of a business with high earnings volatility due to fluctuations in grain prices and livestock industry conditions will increase the visibility of future performance.”

In fact, CJ F&C’s performance has fluctuated significantly depending on upstream industries such as grain prices and livestock industry conditions, including outbreaks of infectious diseases. While its operating profit reached 150.6 billion won in 2021, the company posted an operating loss of 86.4 billion won in 2023. Last year, CJ F&C recorded sales of 2.3085 trillion won and an operating profit of 74.7 billion won.

CJ CheilJedang has recently continued its efforts to optimize its portfolio and secure profitability, including the sale of its Chinese bio subsidiary, Youtell. Analyst Kang added, “The sale of CJ F&C is a positive event that will allow the company to focus on this investment point when demand for processed foods recovers in the future.”

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