South Korea: Leading brewer Hite Jinro expected to post somewhat sluggish Q3 results

Korea’s Hite Jinro is expected to post somewhat sluggish results for the third quarter of this year. This is attributed to the prolonged downturn in the dining-out market and a continued decline in alcoholic beverage consumption, The Asia Business Daily reported on October 17.

On the 17th, Korea Investment & Securities maintained its target price for Hite Jinro at 24,000 won and its "buy" investment rating, citing these factors. The previous day's closing price was 18,850 won.

Third-quarter results are projected at 680.6 billion won in revenue and 62.6 billion won in operating profit. Compared to the same period last year, revenue is down 0.7% and operating profit is down 10.8%. Operating profit is also 4.0% lower than the market consensus.

The company continues to face difficult business conditions due to the sluggish dining-out market and the prolonged decline in alcoholic beverage consumption. Despite increased marketing expenses and the government's issuance of consumer coupons, the rebound in alcoholic beverage shipments has been limited.

Beer business performance is estimated at 226.4 billion won in revenue and 14.9 billion won in operating profit, down 7.8% and 29.3%, respectively, from a year earlier. Beer shipments in the third quarter are expected to decline by double digits. The average beer shipment price was raised by 2.7% as of June, which is believed to have driven demand for securing volumes in the second quarter.

The soju business performed relatively well. Soju business revenue is estimated at 290.6 billion won, with operating profit at 49.1 billion won, up 3.6% and 2.0%, respectively. Although the increase in shipment volume was limited, there was no price hike in the second quarter, resulting in stable performance. The company continues to maintain a high market share in the upper 60% range. In the third quarter, domestic soju shipments are estimated to have increased in the low single digits, while exports likely grew by more than double digits.

Kang Eunji, a researcher at Korea Investment & Securities, explained, "Soju maintains an overwhelmingly high market share compared to competitors, and since there are no plans to launch new beer brands, the likelihood of intense market competition as seen in the past is limited. After the Vietnam plant begins operation at the end of next year, we expect an increase in overseas sales proportion and improved profitability."