Kencoa Aerospace Achieves Operating and Net Profit Turnaround... "Sales Hit Record High for 6 Consecutive Quarters"

[Asia Economy Reporter Jang Hyowon] Kencoa Aerospace announced on the 16th that it achieved an operating profit of 2.2 billion KRW on a consolidated basis in the first half of the year, successfully turning to profitability. During the same period, sales increased by 46% year-on-year to 35.2 billion KRW, and net profit turned around to 1.2 billion KRW.

In particular, Kencoa achieved record quarterly sales for six consecutive quarters since its listing, driven by increased production in its passenger-to-freighter conversion business. The Korean headquarters recorded a 68% sales growth compared to the same period last year.

The passenger-to-freighter conversion business involves producing MRO structures required for AIRBUS freighter production in Korea and exporting them to eight global locations where the actual conversion work takes place: three sites in Singapore, one in Germany, two in China, and two in the United States. In fact, Korea is taking the exclusive lead in producing MRO structures essential for AIRBUS’s main freighter conversions.

The company explained that as this business entered its second year of mass production, it moved beyond the early production stage to the full production stage, rapidly improving cost ratios. Additionally, sales growth and steady profit margin increases at its U.S. subsidiary enabled the turnaround to net profit in the half-year period.

Furthermore, the U.S. subsidiary California Metal contributed to the operating profit turnaround by significantly increasing sales of raw materials for the space sector to global space companies such as Blue Origin, SpaceX, and Virgin Orbit. California Metal recorded a steep 47% year-on-year sales growth in the U.S. space raw materials sector.

Recently, through the issuance of 10 billion KRW worth of convertible bonds (CB), the company plans to start mass production of the ‘Freighter Mega Door Frame (FSS)’ project, an additional order in the passenger-to-freighter conversion business. The 8th tranche of CB, fully paid on the 28th of last month, was successfully raised under conditions allowing 100% call option exercise, alleviating concerns about equity dilution and overhang, securing funds for the new business.

While successfully carrying out large-scale MRO projects, Kencoa has also been selected as an offset partner, leading to visits from global aerospace companies such as Airbus, Airbus Defense, Airbus Helicopters, Israel Aerospace Industries (IAI), Embraer, and Lockheed Martin to Kencoa’s headquarters to discuss additional business opportunities.

Kencoa CEO Min-kyu Lee stated, “Thanks to balanced growth across our defense, aerospace MRO, SPACE, and UAM business portfolios, we have set record-high sales for six consecutive quarters since listing. Based on the half-year profitability turnaround, we will focus not only on rapid sales growth but also on profit growth, maximizing corporate value through active entry into rapidly growing new industries such as the space industry and UAM.”