Exchange Rates, Freight and Costs: "Triple Whammy" Drives Hansol Paper Into First Loss in Seven Quarters

Q3 operating loss of 6.4 billion won
Profitability weakens in printing and specialty paper
Price hike efforts expected to face hurdles

Hansol Paper posted a loss in the third quarter. Profitability plunged amid the impact of falling exchange rates and higher transportation costs.

According to the Financial Supervisory Service's electronic disclosure system and other sources on Nov. 3, Hansol Paper swung to an operating loss of 6.4 billion won in the third quarter on a consolidated basis. This was its first quarterly operating loss in seven quarters, since the fourth quarter of 2024, and marked a sharp decline from the second quarter, when it posted operating profit in the 50 billion won range in an earnings surprise. Revenue rose 2.8% year over year to 570.2 billion won, while the company recorded a net loss of 13 billion won. Analysts had forecast operating profit in the 2 billion won range for the third quarter, but results contracted sharply as profitability in its paper business deteriorated.

Preliminary sales by product were 148.7 billion won for printing paper, 146 billion won for industrial paper, 197 billion won for specialty paper, and 78.5 billion won for other products. Specialty paper sales grew 14.9% year over year, while printing paper and industrial paper sales rose just 1.1% and 1.0%, respectively. Operating losses by business segment were 13.3 billion won for printing paper and 4.8 billion won for specialty paper. Industrial paper and other products recorded preliminary operating profits of 6 billion won and 5.7 billion won, respectively.

More than 50% of Hansol Paper's exports are printing paper and thermal paper. With a high proportion of transactions settled in foreign currencies, continued declines in exchange rates have weighed on profitability. A surge in ocean freight rates amid the fallout from the war in the Middle East also hurt results. The Shanghai Containerized Freight Index (SCFI) climbed nearly threefold, from 1,114.52 on Sept. 26 last year to 3,687.83 on Sept. 26 this year. The SCFI tracks freight rates on container shipping routes worldwide; the higher the index, the more companies have to pay for freight.

Hansol Paper's Sintanjin plant. Hansol Paper

Prices of pulp (SBHK), a raw material, are also rising steeply. They surged from $600 per ton in December last year to $760 per ton at the end of October. The price of waste corrugated cardboard, a raw material for industrial paper, rose from 90.8 won per kilogram in September last year to 92.9 won per kilogram in September this year. Park Jong-ryeol, a researcher at Heungkuk Securities, said, "Several factors came into play: a base effect from tariff refunds compared with the previous quarter (-20 billion won), the impact of falling exchange rates (-20 billion won), and the impact of higher costs (-10 billion won)."

The market is focused on how Hansol Paper will seek to improve profitability going forward. This has raised the possibility of an increase in printing paper prices, but analysts say it will not be straightforward, as publishers and small and midsize printing companies are strongly opposing major paper manufacturers' attempts to raise prices. Publishers, in particular, are taking issue with what they call "illegal collusion among paper manufacturers" and are even preparing a joint damages lawsuit.

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