Ladies and gentlemen, I am Jun Seong, head of IR team at Finance, Corporate Finance. We'll now begin the Q1 2024 business results report for CJ CheilJedang. Today's session will be interpreted simultaneously into English for foreign investors. Let me first introduce the CJ team. We have Mr. Kang Kyoung-suk, head of Corporate Finance; Mr. Chung Geun-young, head of Food Korea Business Management; Mr. Cho Jae-bum, head of Food Business Management; Mr. Kim Jung-hyun, head of Bio Business Management; and Hwang Hyun-joo, Mr. Hwang Hyun-joo, head of Feed and Care Business Management. Mr. Kang Kyoung-suk will first walk us through the business results, followed by progress on key strategy execution and outlook by respective presenters. We'll then move on to Q&A.
Ladies and gentlemen, I am Kang Kyoung-suk, head of Corporate Finance. Today's agenda includes Q1 highlights, earnings analysis by business unit, key indicator analysis, and progress on key strategy execution, followed by outlook. Let's flip to page 5. First, as the Lunar New Year gift set sales is reflected to the full quarter performance in Korea, growth continues in the U.S., and the high-margin products are growing and expanding in bio. Q1 sales rose by 1%, OP 78%. In Food Korea, processed Food led sales growth by 4%, mainly thanks to the difference in the timing of reflecting Lunar New Year gift set performance.
Consumers shift towards at-home dining, recovery in online channels, and new products based on emerging trends. U.S. saw growth in core products like pizza, mandu, and frozen ready meal, and key channels such as B2C and K-12. Europe expanded into mainstream in key markets and entered new countries. mandu sales stayed high in Australia. Likewise, the overseas Food business recorded high growth in new markets. As for bio, high-margin products such as tryptophan, specialty amino acids, and TasteNr ich contributed to margin mix improvements, resulting in OP growth.
Moving on to the next page. Let's now look at Q1 corporate results excluding CJ Logistics. For sales, growth of Food in Korea and U.S., and high-margin product expansion in bio resulted in KRW 4.4442 trillion. OP stood at KRW 267 billion thanks to the different dates of Lunar New Year in Food, Korea, and growth in U.S., and expansion of high-margin products in bio. Net profit increased thanks to OP, recording KRW 100.8 billion. Including CJ Logistics, sales went up by 2% to KRW 7.216 trillion, and OP increased by 48.7% to KRW 375.9 billion in Q1. Next, let's look at performance by business unit. It's page 8. First up, food. In food, sales volume increase of core products in Korea and the U.S. and streamlined SG&A contributed to profitability improvement.
Sales increased by 3% year-over-year. Despite Jixiangju divestiture, sales improved thanks to the base effects arising from the different dates of Lunar New Year, volume growth of core products like Hetbahn and mandu and holiday products, and market leadership of Bibigo and Red Baron in the U.S. mandu and pizza markets. As for OP, thanks to the full quarter sales of Lunar New Year gift set in Korea, which boosted profitability, sales growth led by processed food, sales growth of high-margin products in the U.S., and efficient resource allocation, we recorded KRW 184.5 billion year-over-year growth of 38%. Next, page 9. Next is more details on food sales in Korea. Food Korea recorded KRW 1.4563 trillion, up by 4% year-over-year.
Processed food growth was propped up by core products like mandu, frozen ready meal, Hetbahn, and processed meat. For food ingredients, sales decreased due to the base effects from last year's ASP hike and focus on profit margin of key products, but volume decline has been eased. Overseas sales of foods reached KRW 1.3752 trillion, up by 2% year-over-year. In the U.S., despite the high base of last year, the sales volume of core products led the overall growth. U.S. showed robust growth in key channels such as B2C and K-12. The divestiture of Jixiangju in China and profit-focused operation in China and Japan impacted the overseas performance, but Europe boosted sales in mainstream channel of key markets and entered new countries, and Australia continued growing thanks to high Bibigo sales in Woolworths that we entered in 2023.
If you go on to the next page, OP margin in Q1 was 6.8% excluding Schwan's PPA and 6.5% when including the PPA. Next is Bio. High-margin products such as tryptophan and specialty amino acids maintained high growth, offsetting the slowdown of bulky amino acids. As the sales of TasteNr ich and specialty products in Taste and Nutrition recovered, the sales grew by 3% year-over-year. OP was KRW 97.8 billion, 55% up year-over-year. OP margin improved as the profit fluctuation of bulky amino acids stabilized and the product mix improved thanks to the increased share of high-margin tryptophan and specialty products. As you can see in the next page, the share of specialty products continues growing, accounting for 22% as of Q1 2024. Page 13.
For F&C, sales declined due to the decrease of feed and livestock sales volume, but the deficit shrank thanks to higher livestock prices and stable COGS. Sales dropped 10% year-over-year to KRW 591.1 billion. OP recorded -KRW 15.2 billion. As for feed, due to lower demand exit from low-margin accounts for business structure improvements and scale-down of farming in Indonesia and Vietnam, the volume and sales declined. As for livestock, the deficit was eased thanks to pork price hike from shrinking supply and cost stabilization in Vietnam. In Indonesia, productivity stabilized and DOC farming increased as Lebaran is nearing. Hence, higher livestock price and profitability. On page 15, performance of CJ Logistics. The number of new orders increased, leading to growth of cargo volume and sales. Profit grew thanks to tax-driven business structure.
Sales in Q1 rose 4% year-over-year to KRW 2.9214 trillion, and OP grew 11% year-over-year to KRW 109.4 billion. On page 18, you can see SG&A and non-operating income and expenses excluding CJ Logistics. For SG&A, labor, even though commissions increased, but thanks to the management, our SG&A to sales ratio improved by 0.7, oh, 0.1 percentage point year-over-year. Non-operating expenses stood at -KRW 133.9 billion, KRW 16 billion down year-over-year. Next is page 19. When including CJ Logistics, SG&A and non-operating income and expenses are largely affected by CJ CheilJedang's performance, so I'll skip the details. Next is update on key strategies and outlook. First up is Korean food business update. Despite the continued sluggish consumption trend, CJ CheilJedang is focusing on new product expansion for processed foods and strategic channel growth by leveraging the growing eating-at-home trend.
According to National Statistics Office, inflation for processed foods started to slow down from the second half of last year. From the Q1 this year, inflation rates for dining out surpassed that of packaged food and beverage inflation, making at-home consumption more price competitive. It was until the first half of last year when sales volume for general products, excluding gift sets, was decreasing year-over-year, but year-on-year sales started to grow from the second half. Despite sluggish consumer confidence, CJ CheilJedang strives to continue the momentum for volume growth by nurturing new differentiated products and categories, such as Sobaba Chicken and PlanTable, by leveraging the tailwind of growing at-home food consumption while focusing on strategic expansion of online channels.
Let's go on to overseas food business update. Sales in the U.S. continue to grow based on No. 1 market share position. Our global strategic products, or GSP, show solid growth, and our products deliver high growth in new markets such as Europe and Australia. For example, Bibigo and Red Baron continue to consolidate their No. 1 position at the grocery channel, and thanks to our GSP scale-up strategy, GSPs such as mandu, chicken, frozen ready meal, and processed rice continue to deliver high growth in the global market. In addition, CJ CheilJedang is expanding territory at new markets, delivering 45% growth in Europe, including mainstream channel for key markets, entering new markets in Northern and Southern Europe.
In Australia, sales is up by 70%, led by solid growth at Woolworths, which is No. 1 retailer for the mainstream channel. Next is update on sustainability initiatives. CJ CheilJedang is actively contributing for sustainable consumption trends by expanding PHA applications. Early this year, CJ CheilJedang collaborated with the CU brand to launch two cup noodle products by applying PHA coating technology for packaging. This technology combines PHA and PLA, which is durable and suitable for heating. In addition, CJ CheilJedang developed vinyl packaging material for shipping using PHA.
This new material is made of PHA without using PVC, which has similar material properties to vinyl, and this is biodegradable. This material is now used at CJ Olive Young's two micro-fulfillment centers for same-day delivery service and considered to be used for shipping in other regions as well. In addition, CJ CheilJedang continues its efforts for sustainable business by building a virtuous cycle of resources. For example, we produce ISCC+ certified soybean oil, which is the very first food material in Korea to receive such certification.
This soybean oil with ISCC+ certificate is expected to replace petrochemical materials and contribute to carbon reduction by valuing sustainability throughout the entire product cycle. Moreover, CJ CheilJedang recently signed an MOU with HD Hyundai Chemical to build a virtuous cycle for bio business. While HD Hyundai Chemical produces eco-friendly plastic by using soybean oil and waste cooking oil produced by CJ CheilJedang, CJ CheilJedang applies such plastic for product container or packaging materials. Next is on Korean food business outlook for Q2 of 2024.
For Korean food business, CJ CheilJedang strives to expand sales of processed foods by leveraging at-home consumption trends despite protracted sluggish consumption, expanding online platforms, and developing new differentiated products such as Sobaba Chicken. Even though sales for FI continue to decline, the range of decline is forecasted to be smaller. That being said, CJ CheilJedang focuses on optimizing operational price and volume. Next is overseas food business update.
Thanks to our strong market presence in the U.S., sales will increase, including mandu and pizza, along with GSP category expansion. Not only that, we forecast stronger performance by cost-saving and SG&A management. In Europe and Australia, we forecast growth as we enter more mainstream channels and new markets. Despite the burden for Chinese business due to base effect costs by Jixiangju divestiture, we forecast P&L improvement by restructuring the business, including product portfolio and channel strategy. Next is bio. Though spread between soybean cake and corn is unfavorable for CJ CheilJedang, coupled with the base effect costs by CJ Selecta divestiture, sales growth of tryptophan and arginine is forecasted to offset such decline and make profits. Feed & Care, the pork raising market is forecasted to rebound in Vietnam, making stock raising costs fall.
Thanks to our continuous efforts to improve business structure in Indonesia, profit for F&C will grow compared against the previous quarter. All in all, despite constraints on corporate sales growth in Q2, core products will grow when we exclude the base effect costs by the divestiture of subsidiaries. Corporate sales will be flat versus last year, and OP margin will be 5%-6%. That was all we have prepared for today.
We will now begin our Q&A session. One announcement before we go on. Simultaneous interpretation will be provided for Korean questions, but questions in English will be consecutively translated. Please speak slowly and clearly for the interpreters. Let us begin Q&A. For those with a question, please press star and 1. If you want to cancel, press star and 2. The first question is coming from Kim Jung-wook from Meritz Securities.
Thank you for the opportunity to give a question. First question is about the processed food. In Q1, the volume declined. I am referring to the chart that you provided. Why we are seeing growth in the plan. What is your goal for Q2 about the processed food volume growth? And next is overseas. In overseas, we are seeing 9% growth. But pizza, mandu, and the core products, they are showing steady growth. And I'm curious about the contribution of the other categories aside from the core categories. And what is your plan on the U.S. growth strategy? Please elaborate on that. And in addition, the last question is about bio. In Q1 or H1, the tryptophan your please elaborate on the product mix of tryptophan and specialty amino acids.
Let me answer your question about the processed food, Korea first. As you said, considering the base effect from last year, in Q2 2024, we are expecting volume growth of mid-single digits. We'll still have the advantageous price in terms of at-home dining compared to the dining out. And also, we have new products and our key brands, and we have the strategic promotions ready. And if all are executed successfully, then we are going to achieve the mid-single digit growth. And for the second question, in the overseas food and in the U.S., yes, we have seen steady growth in Q1. But in general, in the U.S., it is going to be impacted by the raw material price reduction. So the competition is getting fiercer. So the competitors have room for promotions.
And CJ has efficiently defended our market share in case of pizza. Despite the base effect from last year, the pizza grew. We are still maintaining the market leadership. Next was mandu. Because of the social media and the viral promotions, we are seeing double-digit expansion of sales. And the sales is also staying steady. Aside from mandu and pizza, especially the processed rice and frozen ready meal, they are growing rapidly in club channels.
And out of our GSP, in case of kimchi and chicken, in case of kimchi, from Q2, we are going to start distribution in private label in a specific club channel. So I believe that we can start on a good note in Q2. And for chicken, from Q3, we are going to distribute to the main club channel in the U.S. Then aside from mandu and pizza, we are going to see steady growth of other categories as well. Let me answer your question about bio.
For Bulky Amino Acids, the expected expansion of the competitors' line expansion was delayed. And also, we are seeing supply reduction of the competitors. So the market is going up and down. So it's fluctuating. So it's flat. However, the spot purchasing prices are going to rebound. So that's the signal that we are getting. And for Specialty Amino Acids, the livestock companies in China are scaling up. And they are vertically integrating. So the overall demand is going up. And in case of Tryptophan, because the global market is improving, so the high prices are going to be maintained. But in the second half, the competitors' supply are going to go up, and the new suppliers are going to enter the market.
So the spot purchasing price like Q1 is not going to stay the same in the second half. So yes, we are going to stay competitive in the market considering the competition. And you mentioned about the ocean freight costs. Well, if you look at the Shanghai index, then it's about 2,300. So it's going up continuously. So the supply disruption from the Middle East risk is expected. And also, the domestic investment is going up. So the ocean freight cost is also going up. But the competitors in China and other countries, they are feeling a lot of burden in terms of the costs. Over the past two months, the Europe-bound ocean freight cost went up by 30%-40%.
And our key area, which is the U.S. and the Latin America, the ocean freight cost has gone up by 100%. So we are advantageous, and we are going to stay advantageous for the near term. We'll take next question. Next up is Park Sang-jun from Kiwoom Securities. Please go ahead. Thank you. This is Park Sang-jun from Kiwoom Securities. So first is about costs. And when we think about raw material price, we see that there is a downward trend. So Q1, do you expect it is already reflected to your plan. And after Q2, is there any wiggle room for more decline? So we are asking for your forecast about cost trends. And second is about profits for food business.
So in Korea, processed food business, except for countries except for the U.S., we expect that margin will be quite high. But excluding the U.S., when we look at sales growth trends, still there is room for improvement for profit. So for example, a country like Australia, while you are preparing sales expansion, are you investing resources? Or is there any reason for declining sales of food ingredients? So could you elaborate on margin changes of food business countries other than the U.S.? And last part is about biobusiness. So specialty products, you said shares are increasing. So this year, in terms of sales volume, CJCJ has any plan to increase a certain item? Could you name the specific item?
And what kind of specification and attribute that product can offer as a growth driver? Thank you. So first is about raw material for food business. For Korea, so grain price starts to decrease. But still, when we consider exchange rates, a high exchange rate per dollar to won, still it gives burden for our costs. And due to geographic issues, still there are many issues that can cause some fluctuations of the price. And same is true for raw sugar. So it is burdensome for our business. And, including processed pork fees, still it's increasing. And international oil prices go up. Same is true for utility price. So it gives a lot of burden for our commodity purchasing fees.
And under such circumstances, we need to think about productivity improvement and bring about efficiency for our purchasing. So we are going to make efforts for more cost optimization. And next question was about profits for overseas business except for the U.S. So we are focusing on global territory expansion, and we are putting resources. But still, we always take profitability as our priority. So we are going to put a lot of focus on maintaining good profits. For example, when we look at other countries' profits except for the U.S., it includes Jixiangju divestiture. So when you exclude those numbers, it will give you a more clear picture.
So last question was about large Bulky Amino Acids while increasing the share for Specialty Amino Acids. And we will maintain such strategy. And background and context behind this is that soybean cake price goes up. And as we use different kinds of grains, so we can improve formulation for Specialty Amino Acids. And for example, we can offer functional parts such as heat resistance. So we can increase our foundation for Specialty Amino Acids delivering double-digit every year. And one of our key products is Arginine.
So it is a growth driver for our biobusiness. And for Bulky Amino Acids, we can improve and improve maintenance for our facility and production equipment so that we can also produce Specialty Amino Acids using this kind of production facilities so that we can improve our costs on a fundamental basis. Thank you.
Let me take the next question. There is no further question. If you have a question, please press star and the number 1. Next question is from Hanwha Securities, Han Yu-jeong.
Hello. Thank you for the opportunity to ask questions. I have three questions. First is, if you look at the Q1 ready meal business, you have mandu, frozen ready meal, and Hetbahn, and other categories, I see setback in the sales. So what are the categories that saw reduction in sales? And the second question, we are seeing the sales drop. So what is the cause and what strategy? And please thirdly, please update me on the Selecta progress and what is going on with the F&C as well. So please share the progress update.
Let me answer your first question. Well, in case in ready meal, actually, mandu is not included in the ready meal category. Our ready meal categories are soup and stew. Yes, it is showing low single digit growth in Q1. For the Japan sales, it has been focusing on the profit, especially in Q1 because of the low yen exchange rate. Our sales dropped by 7%. But from now on, we are going to normalize the prices. So after we are hitting the lowest point in the Q1, and then we are going to rebound. Next is Selecta. About deal closing, let me give you an update on that. Well, the deal closing timing is depending on the approval and the merger filing completion in different countries.
Because we have to conduct this merger filing in multiple countries, we have to prepare for the deliberation in many countries. All the deliberation timing is different by country. So it is really difficult to exactly tell you about the deal closing timing. So if all the timelines are visible, then we are going to tell you about that. And lastly, about F&C. Well, about the request for the public disclosure, we are reviewing various directions of strategy, but nothing is set in stone. So we are going to tell you officially when we do the public disclosure later. Next question.
Next question is from Kim Jung-wook from Meritz Securities.
Yeah. Thank you for an additional opportunity. So for processed foods, so we are seeing a lot of growth for overseas countries. So could you elaborate what are growth drivers behind this growth? And next is about feed. We are seeing improvements still. It is negative in terms of sales. So for example, we can see some improvement in Vietnam and Indonesia in the Q1. So after Q2, is there any room for reducing negative margin? Next is about labor costs and promotion costs. I can see the decline for those two items. Those are one-off decrease. Or is there continuous impact?
Yeah. For Europe business, we have been doing the business well. Same is true for last year. So for Europe, there are mainland Europe and U.K. market, including Britain. So those are two separate markets for our Europe business. So we are expanding our business. For example, in the U.K., we did some MVM for Costco, and it turned out to be very successful. And for mainland Europe, we've used to focus on Germany in the past. But today, we are expanding to northern Europe. So for it will be very good for us to share details, but those are very highly sensitive strategies. So I will close by here.
So next question was about SG&A costs.
Oh, yeah. Let me answer Feed & Care question first. So there are two parts for animal feed. So grain price will go down starting from the Q2. So spread will become more favorable compared against previous quarter. And for animal feed, animal raising, as supply declines in Vietnam, supply trend is getting better. And as grain price will become more stabilized, our costs will go down as well. So compared against previous quarter, we forecast there will be improvements.
Next question was about SG&A management. So you mentioned a labor cost decrease. And the context behind this is that we made a lot of efforts to streamline labor force. And for Jixiangju , as we divestiture, it impacted good for labor cost reduction. And there are more factors behind this. So fees increased. For example, for Schwan's, there are some increase for storage costs, and it impacted the cost. Transportation costs also rise. As you know, because of Red Sea risk early this year, it made ocean freight much more expensive. For promotion costs, it increased slightly.
So for future forecasts, we could say so those trends seem to be maintained for a while. For conversion costs, for Bibigo renewal projects, we are doing that project globally last year. So those costs can go up. But we will be very strict on cost management so that we can maintain the sound level of SG&A costs. Due to time constraints, we will take last question. Thank you.
The last question from NH Securities, Choi Young-hoon.
Hello. I'm Choi Young-hoon from NH Securities. I have some brief questions.
Because we are seeing a lot of issues regarding exchange rates, so I would like to see how you look at the market based on the exchange rate and your response about that. The second question is about net debt. So I can see some resources increasing about net debt response. So what's your outlook and response about that?
Let me answer your first question. Well, yes, the exchange rate is quite high as of now. But we have a very conservative AOP. So compared to our plan, the exchange rate is a little bit higher compared to our AOP exchange rate. And in the past, in food business, because of the raw materials and grain, whenever the exchange rate goes up, that we were negatively impacted by such changes. But we have biobusiness and our U.S. business. And we are seeing good results in the U.S. business.
They are positively impacting our performance. We are more neutral to the less sensitive to the exchange rate compared to the past. In order to respond to such changes in the exchange rate based on our sales, we are setting up a lot of strategies to hedge against risks arising from exchange rates. We are doing our best to do so. For the second question about net debt, as of Q1 2024, our net debt is KRW 6.27 trillion. Compared to last year's, it is about KRW 0.5 trillion increased. It's excluding CJ Logistics and Selecta. The net debt increased because of the foreign exchange rate hike. That is why our liabilities in foreign currency valuation increased.
Because the ocean freight costs are increasing recently, so by different sites, we have the safety stock ready in different regions to respond and prepare for the supply chain disruption. But as time goes by, we are going to see reduction in the net debt as of end of this year. This is it for the Q&A session. And this, let me wrap up the CJ CheilJedang's earnings call. Thank you for joining us today.