Global Expansion, Pricing, and Exchange Rates Drive Surprise Q3 Earnings for Food Industry

Sales and Operating Profits Rise for Companies Focused on Overseas Revenue

Series of Product Price Increases Implemented in Q3

Exchange Rate "Dilemma" as Strong Won Challenges Food Industry

Driven by the global growth of K-food, price increases supporting domestic profitability, and easing of cost pressures from lower exchange rates, the food industry is expected to report a significant improvement in its third quarter results this year. However, as companies focus heavily on global expansion, industry forecasts suggest that financial results will increasingly diverge depending on the proportion of overseas sales.

According to the food industry and financial information provider FnGuide on September 30, the combined consensus (forecast) for the ten major food companies' third quarter of this year points to total sales of approximately 17.7958 trillion won, an increase of 4.0% compared to the same period last year (17.1071 trillion won). Over the same period, operating profit is projected to rise by 11.9% year-on-year to 1.2613 trillion won, up from 1.1268 trillion won last year.

Leading the increase in sales and operating profit within the industry are companies with a high proportion of overseas revenue. Samyang Foods, Orion, and Nongshim—three companies with strong international revenue through exports and local production—are estimated to post a third quarter sales growth rate of 15.0%, which is 11 percentage points higher than the combined average of the ten major firms. The forecasted operating profit growth rate for just these three companies is 25.6%, more than double the rate for the group as a whole.

Specifically, Samyang Foods is projected to log third quarter sales of 820.1 billion won, up 29.8% from the same period a year earlier. Operating profit is also expected to increase by 43.4% year-on-year to 187.7 billion won. On top of steady demand for Buldak Ramen in the United States and China, the company is also reporting meaningful results in Europe—a market long considered barren for K-food.

Nongshim’s third quarter sales are forecasted to increase by 6.9%, from 871.2 billion won last year to 930.9 billion won this year, and operating profit to rise by 14.2%, from 54.4 billion won to 62.1 billion won. The impact of expanded distribution channels mainly in the U.S. and Europe, together with price hikes for domestic products, are expected to offset the burden of raw and subsidiary material costs. For Orion, driven by rising demand in China and Russia, third quarter sales are projected to reach 932.0 billion won and operating profit 156.2 billion won, up 12.4% and 13.3% year-on-year, respectively.

Frozen dessert companies Binggrae and Lotte Wellfood are also expected to see sales and operating profit growth in the third quarter thanks to improved overseas performance. Binggrae’s third quarter operating profit is expected to reach 76.6 billion won, marking a 30.1% increase year-on-year. Lotte Wellfood is projected to see its operating profit rise from 69.3 billion won last third quarter to 87.0 billion won this year—an increase of 25.5%—driven in part by stabilization of its new plant in India.

Sales are forecasted to exceed 505.0 billion won for Binggrae and to reach 1.2176 trillion won for Lotte Wellfood, each expanding more than 5% from the previous year. In both companies, not only has overseas profitability improved during the third quarter, but also domestic demand has risen due to heat waves, along with ongoing structural improvements—all factors that analysts view as positive for performance. The unexpectedly strong results in the frozen dessert sector are expected to continue into the second half of the year.

In addition, Dongwon Industries is expected to record third quarter sales of 2.7261 trillion won, up 5.4% compared to a year ago, with operating profit projected to climb to 164.7 billion won, an 11.2% increase. Daesang is forecasted to post sales of 1.1799 trillion won, up 3% year-on-year, and an operating profit of 57.6 billion won, up 13.2% over the same period last year.

However, not all food companies are seeing rosy results. CJ CheilJedang is expected to maintain third quarter sales and operating profit at a similar level to last year, at 7.4296 trillion won and 346.9 billion won, respectively. Pulmuone and Lotte Chilsung Beverage are forecasted to increase sales in the third quarter by 6.5% and 2.7%, respectively, but operating profit is projected to decrease year-on-year for both. Pulmuone is said to be impacted by losses in its overseas food business, while Lotte Chilsung Beverage is facing cost pressures from raw and subsidiary materials.

For companies with a high domestic sales ratio, their capacity to expand results is limited, which is why the industry explains that they face limits to further growth beyond improving results through reduced cost burden and enhanced operating efficiency. In the third quarter, as food companies raised prices in response to increased costs stemming from the situation in the Middle East, these moves are expected to be reflected in profitability defense and thus the financial results.

Still, the exchange rate remains a dilemma for each company. Food companies import between 50% and as much as 80–90% of their processed food ingredients. On the surface, a strong won has generally been cited as positive for the industry. However, for some companies with high overseas sales, such as Samyang Foods, a weaker won may actually have a negative effect on results.

An industry official stated, "In the second half of the year, as each company controls costs and the impact of product price increases is fully reflected, profitability is expected to improve further. With the won-dollar exchange rate having fallen more than 10% in the third quarter, companies will have to factor in differences such as production sites and raw material procurement, meaning the calculations will be different for each company."

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