CJ Cheiljedang profits drop on cost and economic pressures

[CJ CHEILJEDANG]

CJ Cheiljedang experienced a 40.1 percent drop on-year in its operating profit for the second quarter to 235.8 billion won ($180 million), excluding its subsidiary CJ Logistics, due to cost pressures and the prevailing economic slowdown.

The food manufacturer also witnessed a 3.7 percent decrease in revenue, amounting to 4.4 trillion won.

Its second-quarter net profit declined by 65.6 percent from the previous year to 69 billion won.

Its food business suffered a decline in profitability, with operating profit decreasing by 15 percent to 142.7 billion won. Yet the company managed to achieve a five percent increase in sales, amounting to 2.73 trillion won, thanks to a positive swing in processed food and continued growth in overseas food markets.

Internationally, the company experienced an 8 percent sales growth, driven by strong performance in its global strategic products (GSP) such as mandu (dumplings), chicken, sauces, kimchi and gim (seaweed).

Notably, sales in North America increased by 13 percent, with the company maintaining its leading position in the grocery mandu market with a 49 percent market share. Furthermore, the Red Baron frozen pizza brand by Schwan's, a company acquired by Cheiljedang, won the top-selling brand, surpassing Nestle's DiGiorno with the highest market share.

However, CJ Cheiljedang faced challenges in the Asia-Pacific and European regions, where sales dropped by nine percent. Economic downturns in China and Japan were cited as contributing factors, leading to reduced demand in those markets.

"The company plans to accelerate its K-Food territory expansion in Europe, Oceania and other regions by leveraging its GSP products," CJ Cheiljedang said. “At the same time, the company aims to discover new growth opportunities domestically by introducing innovative products that can replace dining-out trends."

Meanwhile, CJ Logistics, a subsidiary of the food company, reported a 3.2 percent decline in operating profit at 112.4 billion won for the second quarter, demonstrating resilience amidst the global logistics downturn by implementing price increases in its domestic parcel business.

During the same period, the logistics company's revenue saw a decrease of 5.6 percent to 2.96 trillion won.

The company reported 60.1 billion won in net profit, down 10.4 percent from the same period.

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]