Korean ramyeon giant Nongshim posts first loss at home in 24 years

[Photo by Yonhap]

South Korea’s largest instant noodles ‘ramyeon’ company Nongshim recorded its first loss in more than two decades on home turf in the second quarter due to massive losses from skyrocketing raw materials costs.

Nongshim said Wednesday that it incurred 3.0 billion won ($2.3 million) loss from operations in Korea during the April-June period, marking a sharp turnaround from 7.3 billion won operating profit posted a year ago. It is the first time for the instant noodles giant to log operating loss in the local Korean market since the second quarter of 1998 when the Korean currency depreciated sharply during the Asian financial crisis.

Domestic sales rose 15.6 percent on year to 584.5 billion won in the same quarter.

The operating loss of its domestic business was largely due to a surge in the price of raw materials. The purchasing price of wheat flour climbed 46.6 percent and palm oil 52.8 percent in the first half of the year versus a year earlier, according to Nongshim.

To compensate for the soaring materials costs, Nongshim raised the price of its ramyeon products by 6.8 percent in August. It was its first price increase in four years and 8 months but the hike was not enough to cover the skyrocketing flour and palm oil prices.

On a consolidated basis, which includes earnings from operations outside Korea, Nongshim reported an operating income of 4.3 billion won for the second quarter, down 75.4 percent compared to a year ago due to the massive loss from its domestic operation. Sales added 16.7 percent on year to 756.2 billion won.

From January to June, Nongshim generated 38.6 billion won in operating income and 1.5 billion won in sales on a consolidated basis. Income fell 15.4 percent on year although sales expanded by 16.4 percent.

Nongshim shares lost 2.7 percent to 291,500 won on Wednesday afternoon.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]