Operating Profit of 106.9 Billion KRW in Q1... 41% Increase YoY
'Cash Cow' Silicon Business Returns to Profit After 4 Quarters
KCC, which recorded surprising earnings in the first quarter, is accelerating its silicone business. Having completed the acquisition of the remaining shares of Momentive Materials (hereinafter Momentive), a silicone company acquired in 2019, KCC plans to boost the profitability of its silicone business and drive its performance this year.
According to KCC on the 20th, sales in the first quarter of this year reached 1.5883 trillion KRW, up 1.5% compared to the same period last year, and operating profit increased by 41% to 106.9 billion KRW. Net profit also turned positive, recording 454.9 billion KRW.
Looking at each business division, all posted solid results. Operating profit in the building materials division for the first quarter was 44.4 billion KRW, up 26.9% year-on-year. The paint division’s operating profit rose 160.6% year-on-year to 54.6 billion KRW.
Despite the downturn in the construction market, the building materials division performed well with gypsum boards and PVC windows. This was largely due to the stabilization and downward trend of key raw material prices. The paint division saw increases in both sales and profitability due to growing demand from overseas subsidiaries and the shipbuilding sector.
Among the first quarter results, the most notable point is that the silicone division returned to profitability after four quarters. KCC’s core business divisions had been building materials and paints, but by acquiring a 60% stake in the U.S. company Momentive in 2019, it instantly became the world’s third-largest silicone company. The silicone business has served as a ‘cash cow,’ accounting for more than half of the overall performance.
However, in the second quarter of last year, the silicone business was hit hard by the global economic downturn and turned to an operating loss. It failed to recover performance for three consecutive quarters thereafter. But in the first quarter of this year, the silicone market began to revive, with the silicone business recording sales of 738.5 billion KRW and operating profit of 2.7 billion KRW.
KCC explained, “Performance improved due to a reduction in sales of basic product lines, recovery in demand from end consumers, and price increases for products,” adding, “Improved production and sales of automotive-related product lines were particularly effective.”
What draws attention to KCC’s silicone business this year is that it recently acquired all remaining shares of Momentive. According to the acquisition contract in 2019, KCC was required to either take Momentive public (IPO) or purchase the remaining shares by May this year. Instead of an IPO, KCC decided to acquire the shares, demonstrating its commitment to the silicone business.
KCC expects that acquiring 100% of Momentive’s shares will accelerate its own business initiatives and decision-making. First, it plans to expand technological competitiveness through joint technology development with Momentive in paint additives and materials.
Industry insiders expect KCC to continue its performance improvement trend into the second quarter due to factors such as the stabilization of raw material prices. A KCC representative said, “We are maintaining solid performance across all businesses including building materials and paints,” adding, “The improvement in the silicone market, which accounts for a large portion of our sales, is also having a positive impact on KCC’s performance.”
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