Orion Records Q3 Operating Profit of 114.2 Billion KRW, Up 5.9% Year-on-Year

[Asia Economy Reporter Lee Seung-jin] Orion achieved solid performance this year in the third quarter despite pressure from rising raw material prices through management efficiency.

Orion Group announced on the 10th that its business company Orion recorded consolidated sales of 625.3 billion KRW and operating profit of 114.2 billion KRW in the third quarter of 2021. Compared to the same period last year, sales increased by 4.7% and operating profit by 5.9%.

The Korean corporation achieved sales growth of 3.3% to 200.7 billion KRW and operating profit growth of 2.2% to 29.3 billion KRW. Orion explained that despite the overall rise in raw material prices, data-driven management such as product production and inventory management within channels has become ingrained, and efficient cost management through global integrated purchasing enabled stable growth in both sales and operating profit.

The convenient meal replacement brand ‘Market O Nature’ and the protein-enhanced product-focused brand ‘Dr. You’ led sales growth with high growth rates of 32% and 38%, respectively. While the popularity of ‘Kkobuk Chip’ continued, new snack products such as ‘Kwasak Chip’, ‘Oh! Guma’, and ‘Gochu Chip’ consecutively became hits, contributing to growth.

In the fourth quarter, Orion plans to drive growth by launching new products with new formulations and flavors across various categories such as pies, snacks, and chocolates, while increasing market share of the growing Dr. You and Market O Nature brands.

Sales of the China corporation grew by 4.3% to 319.6 billion KRW, and operating profit increased by 19% to 69.6 billion KRW. Sales growth was driven by new product launches of existing mega brands (brands with annual sales exceeding 100 billion KRW) such as ‘Oh! Guma’, ‘Swing Chip Limited Edition’, and ‘Choco Chan Whale Snack’. This year, Orion entered the meal replacement market with the mass-produced bread ‘Songsong Low Songdanga’, focusing on expanding sales channels by introducing convenience store and TT channel exclusive products.

Operating profit grew significantly despite the impact of rising major raw material costs such as shortening and oils, and a base effect from government subsidies related to the COVID-19 pandemic last year. The completion of operational efficiency efforts this year reduced fixed costs, leading to profit improvement from the third quarter, and Orion expects to achieve more stable growth going forward.

In the fourth quarter, Orion plans to expand sales by launching gift planning products for key categories such as pies and snacks in preparation for the ‘Chunjeol’ peak season, and by establishing operational plans to increase product turnover. Alongside this, internal efforts to maintain efficient manufacturing costs will be further strengthened to cope with external environmental pressures.

The Vietnam corporation recorded sales growth of 5.1% to 78.5 billion KRW, while operating profit decreased by 24.2% to 12.7 billion KRW. Demand increased in pie and mass-produced bread categories that can serve as meal replacements, driving performance. The trend emphasizing health and nutrition supported sales growth, with the rice snack ‘An’ growing 56% year-on-year on a localized basis. However, operating profit inevitably declined due to increased prices of major raw materials such as palm oil and sugar, rising export freight costs, strong regional lockdown measures centered on major cities due to COVID-19, and temporary cost increases for COVID-19 prevention.

In the fourth quarter, with the implementation of ‘With Corona’ policies by the Vietnamese government, consumer demand is expected to recover to normal levels. Orion plans to implement on-site strategies to secure shelf competitiveness and accelerate sales by expanding the distribution of new products launched in the second half such as ‘Goute Hot’, ‘Boom Jelly’, and ‘Ssebon Egg Yolk’. Additionally, ahead of ‘Tet’, Vietnam’s largest holiday, Orion will focus on increasing shelf share by early planning and launching gift packages.

The Russia corporation achieved sales of 30.6 billion KRW, a 28.7% increase, driven by the continued popularity of Choco Pie with an expanded lineup and successful expansion of biscuit product lines. The original and jam-filled Choco Pie were equally popular, resulting in a 32% year-on-year sales increase in the pie category on a localized basis. Operating profit was 3.8 billion KRW, down 21.9% year-on-year due to the combined effects of global raw material price increases, rising logistics costs from increased sales volume, and the depreciation of the ruble.

In the fourth quarter, price increase effects are expected. Orion plans to drive sales growth through expanding distribution channels for biscuit products and launching various new products, while steadily progressing with the construction of a new factory in Russia to establish a second growth foundation.

An Orion official said, “Despite difficult management conditions such as economic recession and rising raw material prices, we maintained growth domestically and internationally through the launch of highly competitive new products and efficiency- and profit-focused management restructuring.” He added, “In the fourth quarter, we will strengthen marketing and sales activities in preparation for the peak seasons of ‘Chunjeol’ and ‘Tet’, the largest holidays in China and Vietnam, and continue to achieve simultaneous growth in sales and profits through market expansion including pioneering new categories.”