Q3 Operating Profit 125.3 Billion KRW, Up 42% YoY
Silicon Division Grows for 3 Consecutive Quarters
Despite a sluggish construction market, KCC recorded growth in both sales and operating profit in the third quarter, thanks to its diversified portfolio including paints, building materials, and silicone. In particular, the recovery in the silicone sector is expected to continue into the fourth quarter, projecting the highest operating profit in history.
On the 18th, KCC announced that its consolidated sales for the third quarter of this year reached KRW 1.6342 trillion, with an operating profit of KRW 125.3 billion. These figures represent increases of 5.2% and 41.7%, respectively, compared to the same period last year. The cumulative results for the third quarter are sales of KRW 5.0013 trillion, operating profit of KRW 372.8 billion, and net profit of KRW 378.9 billion.
The growth in these results is largely attributed to the strong performance of the silicone division. The silicone sector returned to profitability from the first quarter of this year and recorded an operating profit of KRW 25.9 billion in the third quarter. This marks a continuous improvement over three consecutive quarters, following KRW 2.7 billion in the first quarter and KRW 18.4 billion in the second quarter.
KCC cited factors for improved profitability including a reduced proportion of sales in basic product lines which decreased losses, margin improvements in high value-added silicone products, and the resolution of destocking (inventory reduction). Additionally, various efforts to improve profitability such as cost of sales reduction contributed to the rise in performance.
The paint division posted an operating profit of KRW 57 billion in the third quarter. Despite the seasonal off-peak period, steady demand for automotive and marine paints, along with strong sales from overseas subsidiaries in China, India, Indonesia, and Vietnam, supported this performance.
On the other hand, the building materials division showed weaker results with an operating profit of KRW 40.8 billion. However, considering the decline in domestic housing permits and building starts, the company views this as a relatively solid performance. Going forward, if regulations on insulation materials are strengthened to enhance fire safety, demand for insulation materials (glass wool) is expected to recover.
KCC’s silicone business is a sector in which Chairman Chung Mong-jin personally led mergers and acquisitions with great dedication. This reflects the company’s intention to restructure its business from traditional building materials to a focus on materials and silicone.
In his New Year’s address earlier this year, Chairman Chung emphasized, “Materials and silicone will be core businesses that become ‘cash cows’ in future markets,” and added, “We must secure competitiveness that is resilient to any changes in the global market environment by boldly investing in research and development to strengthen related technological capabilities.”
Meanwhile, the securities industry notes that China, one of the world’s largest markets, implemented real estate stimulus measures and interest rate cuts in the first half of this year, which increased demand for silicone and consequently raised prices. This is expected to help KCC achieve its highest operating profit this year.
Yoon Jae-sung, a researcher at Hana Securities, explained, “KCC’s operating profit forecast for the fourth quarter is expected to be similar to that of the third quarter. However, if operating profits at the estimated level are generated, the company’s annual operating profit will reach about KRW 500 billion, marking an all-time high.”
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