SONGWON Industrial Group reports stable results for FY 2020

Publishing date: 03.03.2021

•  Sales in 2020 totaled 807,768 Million KRW
•  Net profit amounted to 28,365 Million KRW for FY 2020
•  In 2020, SONGWON maintained a gross profit margin of 20.3%

SONGWON Industrial Group today released its financial results for FY 2020. During Q4/2020, revenues recovered and amounted to 203,843 Million KRW on December 31, 2020, marking a 3.4% increase compared to the same quarter of 2019. SONGWON recorded overall consolidated sales of 807,768 Million KRW for FY 2020 which was slightly lower (-0.8%) than the consolidated sales in FY 2019 (814,340 Million KRW).

As a result of the annual impairment test in December 2020, the Group’s management recognized an impairment loss of -6,889 Million KRW. This was recorded in the consolidated statements of comprehensive income within other expenses. Furthermore, SONGWON’s net profit of 28,365 Million KRW (FY 2019: 35,008 Million KRW) was negatively impacted following the result of the tax audit within the parent company, Songwon Industrial Co., Ltd., conducted by the Korean National Tax Service in 2019-2020 for the financial years 2015-2017. Based on the final notice of assessment, the income tax expense of -10.5 Billion KRW was recognized by the parent company and partly offset by the reversal of the available deferred tax provision for the taxed transaction, resulting in a net impact of -4.6 Billion KRW. Songwon Industrial Co., Ltd. initiated tax appeal filing procedures against the tax assessment made in accordance with its solid contingency plan. It also started a mutual agreement procedure between South Korea and Switzerland.

SONGWON began 2020 solidly, registering sound growth and increased revenues in Q1 based on the uncertainty and concern relating to possible supply disruptions which customers expected and their subsequent stocking up activities after the emergence of the COVID-19 pandemic. Compared to Q1/2019, both Divisions, Industrial Chemicals (+10.7%) and Performance Chemicals (+10.1%), recorded increased sales throughout the 1^st quarter of 2020. As the pandemic quickly spread and negatively impacted many industries, SONGWON noted a decline in demand in Q2 and during the 2^nd half of the year but observed signs of recovery in the final months.

As a result of the uncertain global economic situation, Division Industrial Chemicals saw a decline (-3.3%) in revenue in FY 2020 compared to 2019. Although negatively impacted by the drop in sales prices due to pricing formulas induced by lower raw material costs, the Division saw this partly offset by higher sales volumes as a result of customers’ mitigating possible shortages in production, supply and logistics capabilities. Overall, the Division was able to maintain and increase its market share selectively across the portfolio after demand picked up in Q4/2020 across most regions, particularly in Asia.

Despite the pandemic negatively impacted certain industries and markets in the 1^st quarter 2020, Division Performance Chemicals was able to maintain stable revenues throughout FY 2020, with economic improvements indicated across its businesses. In the final months of the year, the Division’s result was positively impacted by demand recovery particularly in the automotive market (with some exceptions). In response, SONGWON increased capacities to meet the rise in demand and to allow the Division to benefit from new business opportunities.

However, despite its continuity plan implemented in February, the renewed lockdowns in Q4/2020 resulted in customers’ fearing new supply disruptions and led to unexpected surges in demand with short lead times. As a result, SONGWON was unable to fully support all orders for certain products.

Against the backdrop of the ongoing COVID-19 pandemic, with the heightened uncertainty of new virus strains and the accompanying stringent government restrictions which could weigh in on demand, it is difficult to predict what the next few months of FY 2021 will bring. Taking into account the stable results achieved in FY 2020, SONGWON believes that the trends seen at the end of FY 2020 will continue into 2021 with demand especially from customers in Asia remaining strong in the short-term. Going into 2021, while remaining cautious and closely monitoring developments, SONGWON will continue to implement additional plant utilization to meet the customers’ demands and safety stock requirements.