S.Korea's Nongshim earns H1 operating profit of $89 million

South Korean food and beverage giant Nongshim Co. saw operating profit in the first half of the year more than double thanks to strong instant noodle exports and sales at its overseas subsidiaries, with over half of its operating profit earned abroad.

The company on Friday announced tentative first-half sales of 1.7 trillion won ($1.2 billion), operating profit of 117.5 billion won and net profit of 99.2 billion won on a consolidated basis. Sales increased 13.8% year on year, operating profit 204.5% and net profit 62.6%.

The operating profit rate was 6.9%, a big jump from 2.6% from last year's first half.

Nongshim's strong performance was thanks to its overseas business.

Its US subsidiary showed remarkable growth in the first half with sales of 316.2 billion won, up 25.2% year on year, and operating profit of 33.7 billion won, an incredible 536% leap. Thus 28% of Nongshim's operating profit in the first six months of the year came from the American market.

"We maximized sales under a strategy of selecting and focusing on large trading partners and created new demand by expanding the number of outlets to introduce new products," a company source said.

Nongshim better managed its distribution network through priority supply of its flagship products like Shin Ramyun to the top four distributors in the US such as Walmart and releasing new products as quickly as possible. Its US subsidiary thus showed sales growth of 47% at Costco and 95% at Sam's Club.
 
The company's second plant in the US was another factor in its rapid growth. Nongshim promptly launched a high-speed line at the facility given surging demand for instant noodles in America after the COVID-19 pandemic. The company also raised its wholesale prices 9% on average in America in the second quarter of last year, and the stabilization of global shipping rates since last year's fourth quarter were cited as factors contributing to the hike in operating profit.

Nongshim Chairman Shin Dong-won tripled the company's annual sales target on the US market to $1.5 billion by 2030, which would his brand No. 1 for instant noodles there. To this end, construction of a third plant there is set to begin in 2025.

On the domestic market, the company raked in a surplus of 27.3 billion won in the second quarter, a huge turnaround after finishing 3 billion won in the red in the same period last year.

Nongshim's consolidated performance in this year's second quarter was 837.5 billion won in sales, up 10.8% year on year, and 53.7 billion won in operating profit, an amazing leap of 1,162.5%.

"We saw big growth in operating profit thanks to the base effect since our domestic business posted a deficit in the second quarter of last year," a Nongshim source said. "But this was a slight dip from our operating profit in this year's first quarter (63.8 billion won)."

"Due to the global situation and abnormal climate, prices of raw materials like starch, soup and seasoning continued to rise to raise the cost burden."

Meanwhile, the effect of Nongshim's price cuts from July 1 on Shin Ramyun (50 won) and shrimp crackers (100 won) is expected to be reflected in its third-quarter earnings.

Write to Kyeong-je Han at hankyung@hankyung.com