Building Material Big 2, Favorable Winds in Q2... Continuing Performance Improvement

KCC Reports 36% Increase in Operating Profit Year-on-Year
LX Hausys Continues Quarterly Operating Profit Growth Trend

KCC and LX Hausys, the 'Big 2' in the building materials industry whose performance had declined due to the real estate market downturn, are expected to continue improving their results this year. They are projected to record solid performance in the second quarter following the first quarter.

According to financial information provider FnGuide on the 15th, KCC is expected to record sales of 1.635 trillion KRW and an operating profit of 123 billion KRW in the second quarter of this year. These figures represent increases of 3% and 36%, respectively, compared to the same period last year.

KCC experienced a 38% decrease in operating profit in 2023 compared to the previous year. The sluggish performance was largely due to oversupply in China, a slowdown in manufacturing growth caused by economic contraction in Europe and North America, which weakened the silicone business, and uncertainty in the housing market.

However, KCC's performance significantly improved in the first quarter of this year as the silicone market revived. The silicone business is a key segment, accounting for more than half of KCC’s sales. Operating profit in the first quarter rose 41% year-on-year to 106.9 billion KRW, driven mainly by improved profitability in the silicone business.

In the second quarter, the overall business including building materials and paints maintained solid results, with expanded silicone sales contributing to performance improvement. The industry particularly notes the impact of increased sales of high-value-added silicone and cost burden relief due to changes in raw material contract structures.

LX Hausys is also expected to continue its decent performance in the second quarter. Sales are projected at 930 billion KRW and operating profit at 40 billion KRW. These figures represent decreases of 0.8% and 18%, respectively, compared to the same period last year, but this is due to a base effect from last year’s unexpectedly strong second-quarter results. Compared to the first quarter of this year, sales increased by 9.6% and operating profit by 25.6%.

The second-quarter performance of LX Hausys is attributed to the stabilization of prices for key raw materials such as polyvinyl chloride (PVC), expansion of customer base, and recovery in business-to-consumer (B2C) transactions.

The increase in apartment sales volume centered around the Seoul metropolitan area is also positive. According to the Seoul Real Estate Information Plaza, apartment sales in Seoul reached 5,727 transactions last month, surpassing 5,000 for two consecutive months including May.

An industry insider explained, “If the U.S. interest rate cuts proceed in the second half of this year, the domestic construction market is expected to gradually recover, leading to a rebound in performance for the building materials, furniture, and interior industries.”