International Cosmetics ODM COSMAX still Affected by Supply Chain in H1

Abstract: Korean cosmetics ODM COSMAX grows 3.56% year-on-year in H1, down 6.6% in China.

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Recently, Korean cosmetic ODM COSMAX released its financial results for the first half of 2022.

According to the financial report, COSMAX achieved revenue of $642 million in the first half of the year, up 3.56% year on year. Its operating profit was $248 million and its net profit was $12.4 million.

According to the earnings report, the Korean domestic market remains COSMAX's top market. In the first half of 2022, its revenue in Korea was $380 million, accounting for 59.08% of its total revenue, up 9.03% year-on-year from $348.1 million last year.

The Chinese market is the largest and strongest market in COSMAX global layout. According to the report, COSMAX China market revenue in the first half of this year was $241.3 million, accounting for 37.57% of COSMAX's total revenue, down slightly by 6.6% from $258 million in the first half of last year.

COSMAX revenue in China declined in the first half of this year, mainly due to the supply chain's inability to operate normally due to the epidemic lockdown in Shanghai earlier this year. According to the financial report of second quarter 2022, COSMAX also mentioned that the prolonged supply chain disruption and restriction in China affected results in China and Korea, resulting in negative sales growth compared to the same period last year.

Founded in 1992, COSMAX has subsidiaries and factories around the world, including Korea, Shanghai and Guangzhou, China, Jakarta, Indonesia, and Ohio, USA. It serves major global cosmetics groups such as L'Oreal, Amore Pacific, and LG, involving more than 300 brands. As of today, COSMAX has more than 3 factories in Shanghai and Guangzhou, China. In October 2021, COSMAX’s Shanghai factory reportedly produced 53,661,338 units in a single month, exceeding 50 million units for the first time. Together with the Guangzhou factory, the monthly production has reached nearly 70 million units, setting a record for the highest monthly production of COSMAX Group.

Another international cosmetic ODM/OEM manufacturer, Intercos, also released its first-half financial results a few days ago. The company's revenue was about 376 million, up 17% year-on-year. Its adjusted net profit was about $21.2 million, up 54.4% year-on-year. It is worth mentioning that, compared with other large beauty groups, Intercos' market share in China is still not large. But emerging Western brands are just starting to enter China, which means that Intercos is expected to grow in China and will continue to expand in China and Asia in the future.

At the same time, Intercos also said that the supply chain crisis has lasted longer than expected, the economic recession and other unfavorable factors may also affect the company's earnings growth. This coincides with the supply chain disruption mentioned in COSMAX's earnings report. In response to the deep global supply chain crisis, Intercos said that the diversification of supply sources due to its global operations and the growth of raw material inventories in 1H22 led to an increase in the Group's production viability in the second half of the year compared to 1H of 2022.

Various international ingredients giants in the daily chemical industry have also recently indicated supply chain issues in their earnings reports. Frank Clyburn, CEO of International Flavors and Fragrances (IFF), said in IFF's second quarter 2022 earnings report that IFF has now raised prices on its products in response to inflation and market pressures due to rising global raw material, logistics, and energy prices.

Thus, ingredients and supply chains have become a common problem for upstream and downstream cosmetic companies. COSMAX, as an upstream cosmetics company, will probably respond to this dilemma by diversifying its supply sources and raising prices in the future.