South Korea’s building and industrial materials company KCC Corp. received a blow from the slowdown in the local housing construction market and higher raw materials costs, reporting lower-than-expected operating profit for the second quarter.
KCC in a regulatory filing on Tuesday reported that its consolidated operating profit for the second quarter ended June reached 86.1 billion won ($77 million), down 7.1 percent from a year ago and below the market consensus of 93 billion won.
Its bottom line also swung to a net loss of 335.4 billion won over the same period despite a 3.5 percent rise in sales to 1 trillion won. The company blamed devaluation in its equity holdings in Samsung C&T Corp. and Hyundai Heavy Industries Co. for the net loss.
KCC shares fell 0.87 percent and closed at 342,500 won in Seoul trading on Wednesday.
For the full first six months, the company delivered an operating profit of 141.6 billion won, down 13.2 percent from the same period last year. Sales rose 5.9 percent on year to 1.9 trillion won.
The company attributed its weak performance to poor sales of mainstay products such as flooring, windows, and doors due to the cooling in the local apartment construction demand following a series of government measures to rein in the heated housing market. International oil price hikes also led to an increase in the price of polyvinyl chloride, one of the raw materials for its products.
“We`ve been hit hard by higher raw materials prices and increased sale and management costs after the expansion of our construction materials business,” said an official at KCC.
Market analysts, however, say its losses could be recouped in the third quarter from overseas business. KCC is seeking to buy U.S.-based silicone company Momentive Performance Materials that boasts of the third-largest share in the global silicone market.
Hanwha Investment & Securities on Wednesday maintained the company’s stock price target at 470,000 won and its investment opinion of “Buy.”
By Ahn Byung-joon and Lee Ha-yeon
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