Korea Ratings·KR Upgrades COSMAX Credit Rating from 'BBB+' to 'A-'

Outlook Upgraded from 'Positive' to 'Stable'

Korea Ratings·KR has upgraded the credit rating of COSMAX’s unsecured bonds from 'BBB+ (Positive)' to 'A- (Stable)'.

Korea Ratings·KR announced on the 1st that it had adjusted COSMAX’s unsecured bond credit rating as above following its regular evaluation on May 29.

The main reason for the rating adjustment was the company’s continued structural growth in scale, driven by increasing orders from domestic small- and medium-sized cosmetics brands. Korea Ratings·KR stated, “Since 2023, small- and medium-sized cosmetics brands have expanded their customer base globally via SNS platforms such as TikTok, and COSMAX has responded to the resulting increase in ODM/OEM demand, maintaining robust top-line growth.”

The sustained improvement in profit-generating capacity also contributed to the rating upgrade. Korea Ratings·KR added, “Improved utilization rates and a lighter fixed cost burden resulting from top-line growth, together with the benefits of a diversified regional portfolio, have led to a sustained increase in profit generation. Supported by the expansion of orders and sales growth, the ongoing improvement in utilization rates and fixed cost burden enabled the company to achieve an excellent operating margin of 10.1% on a standalone basis in Korea last year.”

Furthermore, the agency noted, “In the first quarter of this year, a rapid shift in brand and product mix from color cosmetics to skincare led to short-term earnings fluctuations in both the domestic and Chinese subsidiaries, resulting in a slight decline in consolidated operating margin compared to the same period last year. However, profitability is expected to improve gradually through process streamlining and optimization of production operations. Considering that COSMAX’s U.S. subsidiary, which had been recording operating losses, is now showing both top-line growth and improved profitability due to increased orders from new brands, we expect a continued trend of solid profit generation on a consolidated basis.”

Additionally, Korea Ratings·KR forecast that COSMAX will manage its financial burden by leveraging its improved operating cash flow. The agency stated, “Despite increased net borrowings caused by investments such as the capital reduction of COSMAX East in 2023, the expansion of Pyeongtaek Plants 1 and 2, and the construction of a new logistics center in 2024, as well as increased working capital needs, the company’s enhanced profit generation continues to support a trend of easing financial coverage. Even with future investments expected for the expansion of Pyeongtaek Plant 3 and the construction of the Shanghai office building, COSMAX is projected to control its financial burden through annual operating cash flow expected to exceed 200 billion won.”

This content was produced with the assistance of AI translation services.