ULSAN, South Korea – SONGWON Industrial Group released its audited financial results for the first quarter of 2020, which ended March 31, 2020. After a challenging finish to 2019, SONGWON experienced a solid start to the new year with sound growth and increased revenue. In the first quarter of 2020, the group achieved consolidated sales of 210,543 million KRW and reported a 27.4% increase in net profit (11,182 million KRW) in the first quarter 2020 over the first quarter of 2019. Compared to the first quarter of 2019, the gross profit margin in the first quarter of 2020 decreased slightly from 20.9% to 19.7%. However, both the EBITDA and EBIT margins increased respectively in the first quarter to 12.8% and 8.8%.
Compared to the same reporting period in 2019, the group’s Industrial Chemicals (+10.7%) and Performance Chemicals (+10.1%) divisions both recorded higher sales in the first quarter of 2020. This was mainly caused by customers increasing their stocking-up activities beyond the usual seasonal inventory buildup due to concern for potential supply disruptions caused by the COVID-19 pandemic. During the first quarter of 2020, the group benefitted from the increased demand particularly in its key business, Polymer Stabilizers.
Despite the coronavirus pandemic leading to an extended Chinese New Year and paralyzing China’s automotive industry, the Performance Chemicals division started 2020 stronger than expected. Positively impacted by European competitors’ line stoppages, the division increased its capacities in the first quarter of 2020 to meet the higher demand especially for Tin Intermediates.
By the time COVID-19 reached Korea at the beginning of February, SONGWON had its continuity plan well in place 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, China, was granted special permission by the government to remain open to support the production of protective respiratory face masks by continuing to supply the necessary chemicals.
Although the second and third quarters are historically strong quarters and usually bring an increase in demand, the coronavirus pandemic has led to higher levels of uncertainty and disruption across global markets. In light of this and a possible global recession, SONGWON can no longer be certain that its previously announced business expectations or growth prospects for the 2020 fiscal year are now achievable. Looking ahead, the group expects to see its global activities negatively impacted and the generation of new business delayed. Despite this, SONGWON is aligning its pricing strategies accordingly and continuing to make operational improvements as well as seeking ways through its comprehensive global distributor network to further market penetration and capitalize on opportunities.
While focusing on minimizing the impact of COVID-19 on both its own business and that of its customers, SONGWON will remain cautious and committed to improving profitability going forward by drawing upon its key strengths and leveraging its technology expertise. The company believes it is well positioned to face and overcome future challenges.