CJ Group’s key unit CJ Cheiljedang Corp. and cable channels operating arm CJ HelloVision Co. are expected to see their earnings recover this year after they disappointed the market with poor performance last year due to falling prices of core products and a one-off cost.
The food manufacturing unit of the group, CJ Cheiljedang, posted 156.9 billion won ($137.6 million) in operating profit during the fourth quarter ended December last year, 36.1 percent lower than the market consensus of 245.4 billion won, on sales of 3.74 trillion won.
Despite the disappointing financial results, most analysts recommended to buy the company’s stocks on expectations that it would reflect a rise in raw materials in the retail price of its core products this year. The price of raw sugar soared 50.26 percent this month from the same period last year and that of soybeans surged 20.95 percent over the same period. The company announced last month that it would raise the price of soybean oil distributed to restaurants by 7 to 8 percent and plans to reflect the rise in raw sugar to sale price, a move that is expected to boost its operating profit margin.
CJ Cheiljedang’s bio sector accounting for 20 percent of its entire sales is also expected to contribute to the company’s earnings improvement. Demand for its mainstay item lysine, an amino acid for animal feeds, is rising thanks to the increasing global meat consumption, and its price is forecast to rise 5 percent this year following the rise in the price of its alternative soybean meal.
Expectations are also high on CJ HelloVision despite its operating loss of 30 billion won in the fourth quarter last year, which largely owed to the one-off cost of the rise in transferring terrestrial channels.
Kim Jang-won, an analyst at IBK Securities Co., said the rise in the number of subscribers to its cable TV and Mobile Virtual Network Operator (MVNO) in the fourth quarter signals a possible recovery in the company’s earnings this year. The number of its Internet service and Voice over Internet Protocol (VoIP) subscribers decreased on quarter to 820,000 and 600,000, respectively, in the fourth quarter, but that of MVNO subscribers increased 3.6 percent to 850,000 over the same period.
“Earnings would improve this year as the number of subscribers started to increase in the fourth quarter after falling due to the failed attempt to merge with SK Telecom,” said Choi Gwan-soon, an analyst, at SK Securities Co. According to Korean market data provider FnGuide, CJ HelloVision is forecast to record 80.4 billion won in operating profit this year, up 87.4 percent from last year.
On Wednesday, shares of CJ Cheiljedang ended down 1.5 percent, or 5,500 won, at 357,500 won while CJ HelloVision rose 2.5 percent, or 210 won, to close at 8,710 won.