"Earned More Than Half Overseas" Nongshim's Operating Profit in H1 Up 205% YoY (Comprehensive)

Sales increased by 13.8% to 1.6979 trillion KRW
Expansion of large mart stores... US subsidiary drives growth

Nongshim achieved strong first-half results as its overseas subsidiaries performed well, with more than half of its operating profit generated from overseas markets. In particular, the U.S. subsidiary led growth by creating new demand through expansion into large retailers such as Walmart.

Nongshim announced on the 11th that its consolidated operating profit for the first half of this year was 117.5 billion KRW, a provisional figure representing a 204.5% increase compared to the same period last year. During the same period, sales rose 13.8% to 1.6979 trillion KRW, and net profit increased 62.6% to 99.2 billion KRW.

A Nongshim official explained, “Due to the economic downturn and inflation, demand for relatively inexpensive ramen increased, leading to improvements in sales and operating profit. Especially since Nongshim’s domestic business posted an operating loss in the second quarter of last year, the base effect caused the operating profit growth rate (204.5%) in the first half of this year to be significantly higher than the sales increase (13.8%).”

However, operating profit in the second quarter decreased by 15.8% on a consolidated basis compared to the first quarter, and domestic business saw a 31.4% decline. The Nongshim official stated, “The rise in raw material costs such as starch, soup, and seasoning due to international political situations and abnormal weather conditions increased cost burdens.”

The core of Nongshim’s first-half growth lies overseas. During the first half, Nongshim earned more than 50% of its total operating profit from overseas. Among them, the U.S. subsidiary led overall growth by recording 33.7 billion KRW, accounting for 28% of Nongshim’s total operating profit. The U.S. subsidiary’s first-half sales increased 25.2% year-on-year to 316.2 billion KRW, and operating profit surged 536% to 33.7 billion KRW.

In the first half of this year, Nongshim’s U.S. subsidiary maximized sales through a selection and concentration strategy targeting large clients and continued high growth by creating new demand through the expansion of new product listings. Nongshim focused its distribution network management strategy on supplying flagship products such as Shin Ramyun as a top priority to the top four large U.S. retailers including Walmart and quickly listing new products. As a result, Nongshim’s U.S. subsidiary achieved high sales growth rates of 47% at Costco and 95% at Sam’s Club.

The rapid growth in the U.S. market is attributed to the expanded supply capacity from the operation of the second U.S. factory. After the explosive increase in demand within the U.S. following the COVID-19 pandemic, the situation shifted from exporting products made in Korea to enabling smooth supply through the operation of a high-speed line at the second factory. Additionally, the price increase in the U.S. market in the second quarter of last year (an average of 9%) and the stabilization trend of international maritime freight rates since the fourth quarter are also factors contributing to the increase in operating profit in the first half of this year.

Shin Dong-won, Chairman of Nongshim, recently announced a goal to achieve annual sales of 1.5 billion USD in the U.S. market by 2030, which is three times the current level, and to become the number one ramen brand in the market. To this end, Nongshim plans to begin construction of its third U.S. factory as early as 2025 and accelerate its market penetration efforts.