KleanNara swings to operating profit in Q2 as restructuring efforts pay off

KleanNara, a paper and lifestyle products company, said Friday it swung to an operating profit in the second quarter, crediting cost structure improvements and gains in production and operational efficiency.

In a semiannual report filed Friday, KleanNara said its consolidated second-quarter sales reached 136.31 billion won ($96.3 million), up 10.3 percent from the same period last year. Operating profit came in at 620 million won, reversing an operating loss of 6.19 billion won in the second quarter of last year. The net loss for the period narrowed to 2.99 billion won from 11.31 billion won a year earlier — a reduction of about 8.3 billion won — though the company remained in the red.

Profitability indicators also improved sharply. Gross profit for the second quarter rose to 22.26 billion won from 15.35 billion won a year ago, an increase of 6.9 billion won. The gross margin expanded 3.9 percentage points to 16.3 percent from 12.4 percent, as higher sales combined with a leaner cost structure widened the profitability gains.

The improvement carried through the first half as well. Consolidated first-half sales rose 2.8 percent year-on-year to 261.36 billion won. The operating loss narrowed to 3.35 billion won from 10.05 billion won in the first half of last year — a reduction of 6.7 billion won — while the net loss for the period shrank by about 9.5 billion won to 10.14 billion won from 19.63 billion won. First-half gross profit climbed 24.6 percent year-on-year to 39.36 billion won.

The company attributed the turnaround to restructuring efforts pursued since last year. It proactively managed raw material price fluctuations, raised productivity to lower manufacturing costs, and cut expenses through power savings, expanded process automation, and optimized inventory management and marketing activities.

KleanNara is also reinforcing its business portfolio with a focus on profitability. In its packaging paperboard segment, the company is expanding its overseas sales presence and shifting toward higher-value products. With roughly half of first-half paperboard sales coming from exports, it plans to grow that share further by developing new customers and improving its product mix.

In the lifestyle products segment, the company is strengthening the competitiveness of core products such as sanitary pads while broadening its sales base through exports, original equipment manufacturing and public-sector channels. It is also diversifying its channel mix, including by expanding the lineup of Popomong, its pet-care brand. First-half sales from the lifestyle products division reached 133.76 billion won, accounting for 51.2 percent of total revenue — surpassing the paperboard division's share for the first time, after trailing it in the first half of last year.

Building on the second-quarter operating profit, KleanNara said it plans to sustain the earnings recovery in the second half by strengthening cost competitiveness and production efficiency while concentrating its portfolio on higher-value products and growth channels.

"The results of the restructuring efforts we have pursued since last year are now showing up in our earnings, driving a significant improvement in first-half profit and loss and leading to an operating profit turnaround in the second quarter," a company official said. "In the second half, we will continue to raise cost competitiveness and productivity and strengthen our business competitiveness around high-value products and growth markets to sustain the profitability improvement."

Meanwhile, KleanNara said Tuesday that Chairman Choi Hyun-su was appointed co-CEO of the company. With Choi — the third-generation owner — taking on the role, KleanNara moved to a co-CEO structure shared between Choi and President Lee Dong-yeol. Under the arrangement, Choi oversees the business divisions as well as finance and procurement, while Lee is responsible for the Cheongju factory and human resources.