[Asia Economy Reporter Park Jihwan] KB Securities stated on the 14th that although the decrease in operating profit of Novarex is regrettable, there is no abnormality in the overall business conditions.
Researcher Lee Sookyung of KB Securities said, "Novarex recorded sales of 69 billion KRW and operating profit of 6.7 billion KRW in the second quarter, representing a 14.1% increase and a 2.3% decrease year-on-year, respectively."
The disappointing point in the second quarter performance is undoubtedly the decline in operating profit margin. Researcher Lee said, "Novarex has been a specialized company in health functional food original design manufacturing (ODM) and original equipment manufacturing (OEM), spending less on advertising compared to brand companies," and analyzed, "The improvement in operating profit margin was remarkable due to the steady release of individually recognized raw materials."
The main reasons for the increase in cost of sales ratio this time were the time required for normalization such as machine operation due to the relocation of the new factory and the trend of preference for plant-based soft capsules with higher unit costs. It is explained that these issues have been resolved from the third quarter through the normalization of new factory operations and cost improvements of plant-based soft capsules.
Researcher Lee said, "The annual increase in operating profit margin will be limited, but there is no abnormality in the business conditions," and added, "The upward trend in annual operating profit margin this year is expected to be limited due to the decrease in operating profit in the second quarter." He also added, "Favorable business conditions continue with the release of new individually recognized raw material products in the second half and steady overseas orders from GNC."
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