Orion H2 OP to grow on recovery in Chinese biz

2017.09.29 15:21:56 | 2017.09.29 16:27:55
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South Korea’s confectionary giant Orion Corp. is expected to see a boost in its operating profit in the latter half of this year thanks to the fast recovery of its Chinese business led by restructuring and revived demand for its chocolate-flavored pie snack Choco Pie.

According to market data provider FnGuide, Orion’s operating profit in the third quarter and the fourth quarter is forecast to jump to 66.5 billion won ($58 million) and 72.8 billion won, respectively, from 16.7 billion won in the second quarter ended June.

Market analysts cited the recovery in its Chinese operation that accounted for 56.4 percent of its total sales as of last year for the company’s rosy outlook. Orion’s Chinese operation is expected to see significant improvement in operating margin after its restructuring to enhance the payroll management efficiency and reorganize the logistics networks is completed.

“The operating margin of Orion’s Chinese entity reached about 20 percent last year, two times higher than the Korean unit,” said an official from the securities industry. “Following the latest restructuring, its operating margin is expected to rise further this year.”

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Orion currently holds a 100 percent stake in the Chinese entity with 12,000 employees and operates six manufacturing sites in Beijing, Shanghai and Guangzhou.

Brisk sales of its iconic pie snack Choco Pie have also helped operating margin in its Chinese business remain high despite Beijing’s retaliatory actions against Korean companies amid the ongoing diplomatic spat between China and Korea over Seoul’s deployment of an U.S. antimissile shield. After the change in the head and improvement in sales channels, Choco Pie July sales in China rose to 11.5 billion won from 10.0 billion won a year ago. The Chinese unit reported 210.5 billion won in sales last year.

Market analysts also expected the split of Orion into a business company and a holding company would improve transparency in management, serving as a catalyst for a rebound in the longer term. This year, Orion was separated into Orion Corp. and its holding company Orion Holdings Corp. Share of the two companies started to trade separately on July 7.

Shares of Orion Corp. Friday closed 2 percent up at 97,000 won, while shares of Orion Holdings closed 2.37 percent down at 22,700 won from the previous session.

By Moon Il-ho

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]

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