Abstract
After a challenging end to 2019 [ADPO, May 2020, p. 11], South Korea's Songwon Industrial Group experienced a solid start to 2020 with ‘sound growth’ in both sales and profits, it reports. The company achieved net profit of KRW11.18 billion (c. E8.2 million) on consolidated sales of KRW210.54 billion in the first quarter of 2020, representing year-on-year increases of 27.4% and 10.6%, respectively, compared to the same period last year despite growing concern for the potential impact of the rapid spread of COVID-19.
In 1Q 2020, Songwon recorded an operating profit of KRW18.07 billion, up 31.3%, EBITDA of KRW26.99 billion, a year-on-year increase of 16.9%, and EBIT of KRW18.45 billion, up 32.3%. Both the EBITDA and EBIT margins increased in the first quarter, to 12.8% and 8.8%, respectively. Compared to the same reporting period in 2019, sales showed a positive development in all of the group's regional markets in 1Q 2020. The Industrial Chemicals and Performance Chemicals divisions also both recorded higher sales in the three months ended 31 March 2020.
Sales for Industrial Chemicals increased by 10.7% to KRW156.02 billion while Performance Chemicals posted a 10.1% rise in sales to KRW54.52 billion in 1Q 2020. For Industrial Chemicals, this was mainly caused by increased stockpiling by customers, beyond the usual seasonal replenishment of inventory at the beginning of the year, due to concern over potential supply disruptions caused by the coronavirus pandemic and the desire to avoid supply deficits, Songwon reports. The company's key Polymer Stabilizers business, in particular, benefited from this increased demand during the quarter. Despite the COVID-19 outbreak leading to an extended Chinese New Year and paralysing China's automotive industry, the Performance Chemicals division started 2020 stronger than expected, Songwon says. The Tin Intermediates/Catalyst business was able to take advantage of competitors' line stoppages in Europe and capture new business, it reports. As a result, the division increased its capacities in 1Q 2020 to meet the higher demand, especially for Tin Intermediates. In addition, the division's PVC Additives business also saw a sequential rise in profitability compared to 4Q 2019.
By the time COVID-19 reached South Korea at the beginning of February, Songwon says it had implemented its continuity plan to counteract possible raw material shortages. It also increased capacity levels to match the rise in demand and to ensure that an optimal cost position for the group was maintained. In addition, Songwon's plant in Pingdu, Shandong Province, was granted special permission by the Chinese government to remain open in order to supply chemicals necessary for the production of protective respiratory face masks. Looking ahead, the company intended to focus on minimizing the impact of COVID-19 on both its own business and that of its customers, while remaining committed to improving profitability. In particular, Songwon said it would align its pricing strategies, continue to make operational improvements, and seek ways through its comprehensive global distributor network to further market penetration and capitalize on opportunities.
In related developments, Songwon has announced several new distribution partnerships to boost penetration of the European and North American markets. It has signed an exclusive agreement with Biesterfeld France concerning the distribution of its polymer stabilizers range in France. It has also expanded its partnership with Bodo Möller Chemie in Europe, signing two further exclusive distribution agreements, again covering its comprehensive range of polymer stabilizers. Bodo Möller Chemie Benelux NV is now supplying customers in Belgium, Luxemburg and the Netherlands while Bodo Möller Chemie UK Ltd has taken on this responsibility in the UK and Ireland. Songwon has additionally inked a deal with Bodo Möller Chemie Russia for the distribution of its Songnox brand of fuel and lubricant antioxidant additives in Russia, Belarus and Kazakhstan. Finally, to ensure a reliable supply of its products and provide on-the-spot services for customers in the growing Canadian market, the South Korean company has entered into a partnership with AS Paterson Co Ltd, an established distributor of performance chemicals across the region.
More information: www.songwon.com