Kolmar Korea, Cosmax post record quarterly earnings on K-beauty boom

South Korea's two dominant cosmetics original design manufacturers, Kolmar Korea and Cosmax, have each posted record quarterly earnings as the K-beauty wave continues to sweep global markets. Some analysts say that while the first golden age of Korean cosmetics was driven by large conglomerates such as Amorepacific and LG Household, the current revival is being led by a coalition of ODM manufacturers and indie brands. The growth engine of K-beauty, once centered on established brands, is now extending into the manufacturing sector.

Kolmar Korea announced Wednesday that its consolidated sales reached 861.3 billion won ($609 million) in the second quarter, up 17.9 percent from the same period last year. Operating profit surged 50.2 percent to 110.3 billion won, and net profit for the period rose 68.9 percent to 70.6 billion won. Both sales and operating profit set all-time quarterly records. The operating profit margin improved to 12.8 percent from 10.1 percent in the second quarter of last year.

Cosmax, which released its results Tuesday, also reported record figures. The company's consolidated sales climbed 27.5 percent year-on-year to 794.9 billion won in the second quarter, while operating profit rose 21.3 percent to 73.7 billion won. Net profit for the period jumped 129.0 percent to 50 billion won. Both sales and operating profit were all-time quarterly highs.

Combined, the two companies posted consolidated second-quarter sales of 1.66 trillion won and operating profit of 184 billion won — figures that underscore how the domestic cosmetics ODM industry has established itself as a high-growth sector on the back of surging K-beauty brand exports.

Domestic production units drove particularly strong growth at both companies. Kolmar Korea's standalone second-quarter sales rose 31 percent year-on-year to 430.4 billion won, with operating profit up 44 percent to 70.8 billion won — both all-time quarterly records. The standalone operating profit margin reached 16.4 percent, up 1.5 percentage points from a year earlier.

Rising orders for sun care and skin care products fueled the gains. By product category, skin care accounted for 49 percent of Kolmar Korea's domestic unit sales, sun care for 35 percent and makeup for 12 percent. The results reflected growing sales by indie brands in overseas markets such as the United States, as well as expanded production of new products for global clients.

"Orders increased, centered on skin care and sun care products, driven by the global expansion of indie brands and the peak season for sun care," a Kolmar Korea official said. "Continued new product launches by global clients also contributed to the all-time quarterly record."

Subsidiaries outside the cosmetics business also contributed to Kolmar Korea's consolidated results. HK inno.N posted second-quarter sales of 267.2 billion won, up 1.6 percent year-on-year, while operating profit surged 53.6 percent to 30 billion won, driven by improved profitability from growth in prescription pharmaceuticals, including its gastroesophageal reflux disease treatment K-CAB.

Cosmax's domestic production unit crossed the 500 billion won mark in quarterly sales for the first time. The unit's second-quarter sales rose 23 percent year-on-year to 518.4 billion won, with operating profit up 13 percent to 56.4 billion won. Steady demand for base skin care products was complemented by improved profitability in sun care and gel masks. Direct exports also increased as the client base expanded beyond domestic indie brands to include global corporations and European customers.

Overseas operations also supported Cosmax's growth. Its China unit posted second-quarter sales of 197.4 billion won, up 33 percent year-on-year. The Shanghai subsidiary saw increased orders from local color cosmetics brands, with growth in base makeup products such as cushion compacts and foundations, as well as blushers and lip products.

The US unit, long a drag on Cosmax's earnings, staged a turnaround. Second-quarter sales at the US subsidiary rose 79 percent year-on-year to 53.8 billion won, and the unit recorded its first-ever quarterly operating profit. The result came as years of cutting fixed costs and building a client base centered on indie brands in the western United States paid off, with new client orders and repeat orders from existing large clients rising simultaneously.

Indonesia and Thailand also continued to grow. Cosmax's Indonesia unit posted sales of 28.9 billion won, up 38 percent, driven by a recovery among existing retail clients and growth from new customers. The Thailand unit recorded sales of 24.9 billion won, up 8 percent, boosted by increased repeat orders for hit products from key clients.

The strong results from both ODM companies also reflect a shift in how K-beauty is growing. The market was once dominated by the overseas sales of large conglomerate brands such as Amorepacific and LG Household, but a growing number of indie brands are now simultaneously entering the United States, Europe and Japan, dispersing production orders more broadly. The more domestic brands that enter global markets — rather than the success of any single brand — the wider the order base ODM companies can secure.

Both Cosmax and Kolmar Korea are expanding their client bases beyond domestic customers to include local overseas brands and large global players. They are moving beyond riding the wave of K-beauty brand exports to winning contracts for the research, development and production of products for global cosmetics companies. "The manufacturers have shifted from large conglomerates to small and medium-sized enterprises, and the revenue base has moved from China to the world," an industry official said. "The structure of the cosmetics industry has changed for the first time in more than a decade since the China market closed off."