CJ CheilJedang's bio division is projected to achieve second-quarter operating profit of 66 billion to 69 billion won, according to financial analysts. The recovery follows a first-quarter result of 5.5 billion won, driven by rebounding amino acid prices particularly in methionine. The bio segment had suffered severe downturn since the second half of last year due to intensified competition in arginine and tryptophan markets and resumed influx of Chinese lysine into Europe, causing the fourth-quarter operating profit to fall near zero.
CJ CheilJedang Bio Division Records 10-Fold Q2 Profit Increase
Securities firms estimate CJ CheilJedang's second-quarter bio division operating profit at 66 billion to 69 billion won, representing more than a tenfold increase from the first quarter's 5.5 billion won. The operating margin rose from the first quarter's 0.6 percent to the 5-6 percent range. The bio division experienced severe difficulties starting in the second half of last year as competition intensified in arginine and tryptophan products and Chinese lysine resumed flowing into Europe, pushing down sales prices.
Methionine Price Surge Drives Margin Recovery
Methionine led the turnaround. The essential amino acid used primarily in poultry feed for chickens and ducks is a high-value product with high entry barriers as only a few companies can produce it. International prices surged as supply decreased, with most of the price increase reflected in second-quarter sales prices driving profit improvement. Demand for high-margin specialty products including arginine remained stable. Rising soybean meal prices also supported recovery in both sales volume and prices of feed amino acids. Cho Sang-hoon, research fellow at Shinhan Investment & Securities, stated that "the bio division is acting as a core driver of company-wide operating profit improvement as market conditions recover due to rising oil and grain prices," adding that "the expansion of profit leverage from second-half business normalization is noteworthy."
Analysts Project Continued Bio Segment Growth Through Second Half
The recovery trend is analyzed to spread further into the second half. While the first half saw recovery centered on specialty products like arginine, the second half is expected to see warmth spread across feed amino acids in general, including lysine which has the largest share among feed amino acids. The base effect is significant given the severe downturn in the second half of last year. Nucleic acid has secured earnings stability through long-term contracts. Lee Da-yeon, researcher at Daol Investment & Securities, analyzed that "the bio division's profit recovery starting from the first-quarter low will continue through the second half."
CJ CheilJedang Implements Three-Division Restructuring on July 1
The changed status of the bio division was confirmed in the organizational restructuring implemented on July 1. CJ CheilJedang completely reorganized the existing food-bio dual structure into three divisions: Lifestyle Food, Technology Materials, and Core Materials. Nucleic acid, Taste and Rich (TnR), and PHA, which were two pillars of the bio business, were repositioned into the Technology Materials division pioneering new markets, while feed amino acids including lysine and tryptophan were placed in the Core Materials division responsible for profits. Bio business became core to two of the three divisions. Additionally, CEO Yoon Seok-hwan, who led technological innovation in the bio division, will directly serve concurrently as head of the Technology Materials division. This restructuring allows the performance of high-value businesses like nucleic acid, previously hidden under feed amino acids that fluctuated with market conditions under one "bio" umbrella, to be revealed as a separate division.
FAQ
What drove CJ CheilJedang's bio division profit recovery in the second quarter?
The recovery was driven by rebounding amino acid prices, particularly methionine. International methionine prices surged due to reduced supply, with most of the price increase reflected in second-quarter sales prices. Rising soybean meal prices also supported recovery in both sales volume and prices of feed amino acids.
How did CJ CheilJedang restructure its bio business on July 1?
CJ CheilJedang reorganized from a food-bio dual structure into three divisions: Lifestyle Food, Technology Materials, and Core Materials. Nucleic acid, Taste and Rich, and PHA were placed in Technology Materials division, while feed amino acids including lysine and tryptophan were positioned in Core Materials division. CEO Yoon Seok-hwan will directly serve concurrently as head of the Technology Materials division.
