Ladies and gentlemen, I am Oh Won Sung, Head of IR Team and Finance Strategy. We'll now begin the Q2 2023 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, CFO and Head of Finance Strategy, Mr. Jung Keun-yeong, Head of Food Korea Business Management, Mr. Cho Jae-beom, Head of Food Business Management, Mr. Kim Jung-yeon, Head of Bio Business Management, Mr. Choi Jong-ha, Team Lead at F&B Business Management, and Mr. Hwang Hyun-jo, Head of Feed and Care Business Management. We will first have Mr. Kang, the CFO, walking us through the business results, followed by progress on key strategy, execution and outlook by respective presenters. We will then move on to Q&A.
Ladies and gentlemen, I am Kang Kyoung Suk, CFO of CJ CheilJedang.
Today's agenda includes Q2 highlights, earnings analysis by business unit, key indicator analysis, and progress on key strategy execution, followed by Q3 outlook. Let's now turn to page five. In food, thanks to a positive swing in Korea processed food and continued growth in overseas food, food sales grew 5% year-over-year, and market share of core products in the U.S. has continuously risen, with Mandu accounting for half of total market and pizza claiming number one position for the first time in its core brands. In bio and F&T, despite continued challenges, combined operating profit margin reached 8%, reaffirming their fundamental strength. For Feed and Care, with improved spread in feed, operating profit margin achieved a turnaround quarter-over-quarter, with increase in profits year-over-year as well. Next page, please. Let's now look at Q2 corporate results, excluding CJ Logistics.
For sales, weak performance in Bio has been offset with growth in Food led by the U.S. business, resulting in total sales of KRW 4.4233 trillion. For operating profit, despite the base effect and volatility in external environment, OP increase in Food overseas and F&T narrowed total decline, recording KRW 235.8 billion. With decline in operating profit and increase in non-operating loss, net profit stood at KRW 69.3 billion, when including CJ Logistics, sales declined 4% quarter-over-quarter to KRW 7.2194 trillion, and OP declined 31.7% at KRW 344.5 billion. Next to page 8. Let's look at performance by business units. First up is Food business unit.
Amid persistent global uncertainties, we have focused on nurturing key products and growing channels to improve both sales volume and margin. First, sales grew 5% year-over-year. For Korea, positive performance in new products led by trends and focus on strategic products and growing channels mitigated decline in sales volume, offsetting impact from unfavorable environmental factors. As a result, Korea sales grew 2% year-over-year to KRW 1.4218 trillion. For overseas sales, along with stronger market presence of mandu and pizza in the U.S., GSP sales in key markets continued to grow, minimizing the impact of shrinking consumer sentiment in Asia. As a result, overseas sales grew 8% to KRW 1.314 trillion.
For operating profits, along with an all-out effort to improve OP in Korea, profitability in overseas business rose, led by the U.S., partially narrowing the decline. As a result, OP came in at KRW 142.7 billion, down 15% year-over-year. If you look at the bar graph on the next page, OP margin in Q2 was 5.4%, excluding Schwan's PPA, and 5.2% when including the PPA. Next is more details on Food Korea sales in Korea. Food Korea responded to trends with reinforced product strategies and optimized channel portfolio for growth. For processed food, amid partial recovery in offline demand, namely in major retailers, B2B, and convenience stores, we have expanded key products and new products, scaling back the decline in volume, with sales turning back to growth.
For food ingredients, or FI, amid persisting base effect, pricing action was offset by decline in volume, limiting sales growth. More details on overseas sales. In the U.S., thanks to increase in GSP consumer trials and stronger market presence of pizza, America saw robust sales. In particular, Red Baron achieved number 1 market share for the first time, and Mandu at grocery has solidified market share number 1 presence. As a result, sales grew 13%, with quarterly sales standing at KRW 1.0368 trillion. In Asia Pacific and Europe, new territory expansion in Europe and Australia has been progressing well, but economic downturn in China and Japan led to contraction in demand. As a result, sales in the region dropped 9% year-over-year to KRW 273.6 billion. Bio and F&T on page 12.
First up, bio. Compared to the previous quarter, tryptophan, specialty amino acids and Selecta led improvement. Weak market continued for global amino acids. Consequently, bulky amino acids and Selecta's products saw year-over-year decline in sales and price. As a result, sales declined 20% year-over-year to KRW 892.6 billion.
OP declined year-over-year by 76% to KRW 39.8 billion. Despite robust growth of tryptophan and specialty amino acids, margin declined due to burden from historic high base of last year. For F&T, despite slowdown in demand recovery and delayed materialization of impact from China reopening, profit-driven operation led to enhanced margin. However, base effect from high price of nucleotides last year and slow recovery in demand due to global economic recession, pulled down sales across products and taste and nutrition by 26% year-over-year to KRW 153.4 billion. Operating profits declined by 17% year-over-year to KRW 44.5 billion. For nucleotides and MSG, profit-led operation resulted in year-over-year growth in operating profit margin. TNR and nutrition posted weak performance in their major markets, North America and Europe, due to the ongoing recessions in those regions.
If you flip to the next page, however, share of specialty products and sales has grown steadily to 21% as of Q2 of 2023. Next, on to Feed and Care. With rebound in livestock prices, F&C has continued efforts to structurally enhance profitability. With increase in feed prices, margin has recovered, contributing to increase in operating margin. Sales is down 3% year-over-year to KRW 645.1 billion, OP rose 159% to KRW 8.8 billion. For feed, government policy to control supply led to fall in the number of DOCs and poultry. A rise in feed price led to decline in sales volume of feed in Indonesia. For livestock, due to shortage and supply of hogs in Vietnam, hog prices maintaining an upward trend, due to increase in cogs, including feed price, margin declined year-over-year.
In Indonesia, production cuts led by the government policy and strong demand around the national holiday, pushed up DOC price, hence margin improvements. Now on to page 16, performance of CJ Logistics. Due to decline in forwarding freight rates, sales and OP dropped, but has continued efforts to improve pro-profitability. Q2 sales is down 6% year-over-year at KRW 2.9624 trillion, and OP is down 3% year-over-year at KRW 112.4 billion. Going on to page 19, you can see SG&A non-operating income expenses, excluding CJ Logistics. For SG&A, labor costs increased by KRW 36.94 billion, and transportation cost was down by KRW 56.9 billion.
Despite a prolonged period of inflation with efficient resource allocation, SG&A to sales ratio rose only by a mere 0.4 percentage points to 22.4% year-over-year. For non-operating income expenses, global interest rate hike resulted in increase of KRW 25.8 billion in net interest costs. As a result, non-operating income and expense declined by KRW 20.6 billion year-over-year at negative KRW 129.6 billion. When including CJ Logistics, SG&A non-operating income expenses are largely affected by CJ Logistics performance, so I'll skip the details. Next is on the key strategies and outlook. First up is key trend in the Korean food market. For Korea food, the year-over-year base effect is gradually wearing off. Meanwhile, continued economic recession and high inflation has made processed food a more attractive option to eating out.
The reduction in CJCJ's first half sales versus the same month last year, is being offset by processed food sales. As such, Korea food sales have turned to growth in Q2, showing signs of recovery. Raw sugar and other raw material costs are still high due to inflation, adding to the pressure. CJCJ aims in the second half to drive sales to recover volume in full swing. In order to respond to the current business environment, we will select and focus to strengthen strategic categories and channels. We will drive enterprise cost efficiency and absorb demand for eating in, in peak season and differentiate Chuseok gift sets. CJCJ will continue developing differentiated new products.
Examples include products launched in the first half with same taste quality as restaurant products, like Gourmet Sobaba and Detroit pizza, both receiving great reviews by consumers. The products have driven sales up by 66% and 16% for chicken and pizza, respectively, in the first half, and forecasted to drive sales in the second half as well. Next up is global food trends. In the U.S., our main product is continuously gaining market share, and global strategic products, or GSPs, are showing even growth, adding to strong sales growth in the region. Red Baron brand in the grocery channel in Q2 recorded 19.9% in market share, becoming number 1 for the first time. Since becoming number 1 in 2021, Mandu is widening the gap against competitors, recording 49.4% in Q2, reaching almost 50% in share.
As such, in 2023 first half, as of the B2C channel sales, Schwan's is the frozen food manufacturer that has grown its sales the most versus 2019, before Covid. We expect growth to continue based on its market presence and brand awareness. In China, CJCJ has sold off Jixiangju to put stronger focus on K-food. The proceeds will be used to improve financial status. Jixiangju produces pickled vegetables, zhacai, and paste. CJCJ has sold off its shares on July 19th to Chinese institutional investors. There are no impacts to expanding GSP sales as the business is in different categories and channels. IRR is around 20%, making it a successful investment case. Proceeds amount to approximately KRW 300 billion, which will be used to improve financial status and business operations.
CJCJ is expanding base of K-food in Europe and Oceania by expanding channeling markets already present and entering new markets. In the UK and Germany, mandu and chicken are currently sold in Costco and Itsu, looking to expand markets to France and Northern European region. Over in Oceania, in Australia, Bibigo mandu is currently on the shelves in 1,000 Woolworths stores, the biggest local retailer, since May. In July, we've obtained a local manufacturing facility for a full-blown entry to mainstream channels in not only Australia, but also in New Zealand. Let's go on to bio, tryptophan, and specialty amino acids trends. Tryptophan is growing its share in bio sales from 12% in Q1 2021 to 17% in Q2 2023. The hog industry in China is restructuring and advancing the change led by integrated major players.
As such, the low crude protein trend is spreading, improving the ratio of amino acid and formulation. CJCJ, based on its technological edge and price competitiveness against competitors, is solidifying its market leadership and preempting the increase in demand. Going forward, the hog industry in EU and South American region is expected to be good, and livestock industry is scaling up in China and the APAC region, continuing structural demand growth. However, compared to growing new demand, global supply will fall short, which will drive up price. Specialty amino acid has grown from 12% in Q1 2021 to 21% in Q2 2023. Due to the spread of low crude protein trend, additional demand is surfacing based on different attributes of the raw materials across regions. Arginine is creating new demand by boasting its heat stress reduction function.
Going forward, increase in use of low, low-cost grain to substitute soybean meal will lead to amino acid imbalance, which in turn will create demand for specialty amino acids, such as valine and isoleucine. Specialty amino acids will become a critical part of bio portfolio as more emphasis is put on the different functions of amino acids, such as stress relief and texture improvements. Next is updates on sustainability. CJCJ is using sustainable packaging and ingredient sourcing to minimize environmental impact across all value chain. CJCJ has been working to reduce harmful packaging materials and cut back on unrecyclable materials. Starting from 2019, CJCJ has not used oxo-degradable additives in all plastic packaging. Starting this year, we've listed six materials, including PETG, in the negative list and researching on the feasibility of a gradual phase out.
In addition to reduced greenhouse gas emission and waste from packaging, we are taking part in the European alliance called Forever Green, and have set 4-step process guideline in packaging development. Last year in the U.S., CJ CJ has signed a partnership with MBOLD Initiative, based in Minnesota, to expand infrastructure for recycling films and supply of recycled plastic to drive down greenhouse gas emission and waste. CJ Selecta, since declaring deforestation free in 2021, announced in April that it would no longer purchase any soybean from Amazon rainforest starting this year, achieving their commitment 2 years ahead of schedule. The achievement was possible as more farmers outside Amazon forest participated in the Seed Project, leading to an increase in soybean purchases outside the forest. Seed Project provides seed and financing to farmers and commits to purchasing their entire soybean harvest.
CJ Selecta focuses on building a virtual cycle in which soybeans purchased through the program can be repurposed after processing to reduce carbon emissions in the entire SPC production. Next is on Q3 forecast. Korea food business is expected to see impact from economic recession and high inflation, making processed food more attractive than dining out. By driving wellness business, K-Street Food innovations, partnering with retail sales, and expanding gift set for Chuseok, will drive sales volume recovery. In terms of margin, year-over-year base effect will continue, but cost reduction efforts via TCM project and strategic reduction of SG&A to offset for margin loss.
For global food business, U.S. will continue to see sales volume growth, strengthen market position for Mandu and pizza, newly create, Asian destination zones in major retailers to expand base for GSP sales. For China, actions will be taken for manufacturing, logistics, and marketing and other value chains to boost efficiency and expand channel coverage to minimize impact from economic recession. In Japan, the Vego products like Mandu, chicken, and pea rice, and smaller size Micho concentrate and RTD innovations will drive growth. For Bio, tryptophan and specialty amino acids will see good momentum, and with strategic sales expansion, the business will see improvements versus previous quarter. If China's economy rebounds fully, bulk amino acids like lysine may rebound together, creating a potential business upside.
For FNC, the demand for TNR and nutrition in North America and Europe is moving slowly, has a chance to rebound by leveraging the market position of nucleotide if demand recovers in China. For feed and care, due to reduction in the number of livestock, demands for feed will continue to slump, due to insufficient livestock supply, the Vietnamese hog and Indonesian chicken price momentum will continue, forecasted to maintain profitability. All in all, CJ CJ will continue to see raw material cost pressures, with improving volume in Korea, continued growth of global food sales and tryptophan and specialty products, a rebounding profitability of FNC due to recovering Vietnamese hog price, business and profitability will continue recovering after hitting a trial in Q1. Corporate sales growth for Q3 will decrease by mid-single digits due to continued year-over-year base effect and record OP margin of 6%.
That is 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 for the interpreters. Let us begin Q&A. For those with a question, please press star and the number 1. If you want to cancel, press star and the number 2. First question is Kim Jung-wook from Meritz Securities.
Thank you for the opportunity. I have 3 questions. Number 1 is on, you're saying that the base effect is easing for the processed foods, which is a positive sign, and starting last year, you are seeing, some struggle with Coupang.
Do you see any plus signs in the second half, or do you think the prolonged conflict with Coupang is going to spread and give impact to the other channels? My second question: in the U.S., the frozen pizza became number one, which is amazing. In the food industry, the market share switch is uncommon, and as you are the number one, the number two player now, Nestlé, I believe the competition will become fierce. How are you going to respond to that? After COVID, you have strengthened distribution, you were able to expand sales through that. Afterwards, what will be the efforts that you've been, put in to boost sales even more? Last question is on specialty. Bio specialty is doing well, but the bulk amino acids also need to grow in the same way.
What grounds do you have? Do you see that the business is going to turn around in the second half? That is all.
All right, for the first question regarding Coupang, the deal terms with Coupang and the negotiation is still underway, and the two companies are putting in a lot of effort, but we have not yet come to a solution yet. CJCJ, of course, the Coupang is the number one platform, and there are a lot of opportunities and sales, and we are facing a lot of loss. The other platforms in online business, like Naver and Gmarket and Market Kurly, there are other platforms in the market, so we are offsetting some of the loss.
Starting in the second half, we believe Hetbahn and Mandu and our other strategic products, we will be able to make up for the loss that we have lost due to the Coupang challenges starting nearing the end of this year, we believe, we believe we'll be able to overcome the gap. The impact to the other channels, we believe that the offline demand is growing recently, so where in other channels, we are a bit more competitive. Regardless of the challenges with Coupang, we're seeing strong growth. Just to add, in Q2, looking at other online channels, like if you look at our DTC, CJCj, the market grew by 33%, and Naver and Market Kurly and Gmarket, the other platforms, if we add them all together, we've grown 65% versus last year to make up for the loss.
All right, to the second question on the market share for pizza in the U.S. In our mandu business, we became number one in 2021. Out of the Asian snack category in the U.S., CJCJ is the number one player. Now, Red Baron brand has become the number one brand with 19.9% market share in the grocery channel. For pizza, of course, like, a major player like Nestlé is our competitor. The competition will continue. Accordingly, CJ Schwan's will monitor the economic recession and the economic conditions. According to the retail dynamic and the shifting landscape, we will dynamically monitor and execute our pricing and volume strategy. In 2023 first half, the B2C sales portion grew, and we became the biggest frozen food manufacturer who've grown versus 2019.
Based on our market presence and brand awareness, going forward, we are going to expand our market position in Asian category and the pizza category. We see the synergy with CJ Foods integration is going to really show up in the second half, and we will maintain our strength going forward. Right, on to the third question. The commodity amino acid, due to the pressure of the falling price and delayed in the line expansion, we do see a slight hint of signs of recovery. CJCJ will not go into a price-led competition, and our commodity manufacturing line is going to convert to specialty products specialty product line to continue our profitability.
Now, let's go on to the next question. Next question will be posed by Park Sang-jun from Kiwoom Securities. Mr. Park?
Thank you for the opportunity.
I have three questions in total. Number one is on the U.S. food market. Previously, the market share for pizza has been growing, and if you look at the journey, our price point was a bit more attractive than the competitors, and we were more for the value type to drive up shale share. It was a more value for money product, but you mentioned that you're going to execute a more dynamic pricing strategy. Is it a pivot to the existing strategy, or are you maintaining the existing strategy? I would like to hear more details on the future strategy. My second question is on Europe. The distribution channel is increasing in Europe, I believe that is very encouraging. On the volume that you're selling in Europe, how are you responding in terms of the manufacturing?
I think you are leveraging the existing site, and are you going to leverage the existing sites in Europe, or are you going to export from other countries? What is your strategy for the manufacturing in Europe? My last question is on FNT. For FNT, as the, as it reopens in the market, and for CJCJ, I believe you expect it to rebound, and you have in created FNT. Unlike the expectation, the QOQ, YOY, you're seeing a slight slump, and the momentum is low. How do you see the current situation? Going forward, how are you going to boost the sales and profitability for the FNT business, and what are your plans? Thank you.
Thank you for the question.
For pizza in the U.S., as I mentioned, the pizza market itself in the U.S., we have the premium segment and high premium and mass market, there are different tiers in the market. Red Baron is in comparison to the Nestlé's DiGiorno product. It's a premium segment, the Red Baron. Not only Nestlé, but last year for us, we took some pricing actions. The timing of the pricing action and the timing for, and the amount of pricing increase, if you look, the pizza consumption in restaurants have fallen. Last year, we see a growth in demand for the frozen pizza in retailers. If you look at the first half, we see a slight... In terms of the volume sold, we see a slight slump in volume.
After taking some pricing actions last year, in the first half, we maintained our momentum. In the second half, the visibility, we don't know. We are uncertain whether it will be similar to Q in the first half. In the U.S. region, we believe we are considering whether to focus on promotions or taking pricing actions. It's very dynamic and volatile, so we need to monitor the market closely, and we are monitoring the market very closely. Secondly, the Schwan's pizza, and the reason behind it becoming number one is because we were taking dynamic pricing strategies and actions, and in addition, we maintained the DSD. We believe that was our competitive edge in the U.S. retail market. For the second question regarding the European market, we have been continuously expanding into new territories, including the European continent.
As one pillar, we are looking into we have entered the U.K. and the mainland as well, and we are focusing on the ethnic channel, and we have seen good growth. We sold Mandu and imported products in those channels to drive sales in the past, and now we are listing chicken and Mandu in Costco and Itsu. These are the so-called mainstream channels, and our sales is up, up more than 30%. Going forward, we are driving sales with Mandu currently in the European market. We have the manufacturing site in Germany, and, by looking at the growth in our capacity, we believe starting from 2025, we will be maxing out our capacity. We need to expand our manufacturing sites, and we are looking into considering creating a new site.
To answer your question on F&T, our key product is nucleotide and TNR, the natural food additives. For nucleotide, compared to our expectation, as the reopening impact has been delayed and we see slump in the demand growth in China, and we see a stagnant demand from China. The performance is a bit lower than our expectation because of that. Considering the fact that China will reach its economic target for this year, and if we see the com, Chinese government to boost up its economic growth, we see that it's going to rebound soon in the second half. By leveraging our market presence of our nucleotide, we believe we'll be able to rebound our market volume and profitability.
For TNR, due to global inflation and economic recession, the downstream business for premium segment is going down, and the global CPG players and the local major players, we are creating applications and expanding partnerships. We're preparing relevant strategies, and through, by executing those strategies, we believe we'll be able to rebound in 2025 and onwards. Within this year, we hope to gain POs in our new businesses. One prong would be the phosphate replacement for TNR. It's HYBIND for TNR and the fermentation-based meat flavoring, which is V meat. We have launched those new products, and within this year, we hope to gain some POs for those products. For nutrition solution, the natural antioxidant, the active enrich boost, we have launched the new product, and we hope to see gradual increase in sales.
All right, we'll take the next question. There are no questions waiting at this point in time. For those of you with questions, please press star and press the number 1. The next question is from Kim Hae-in of Morgan Stanley.
Hello, I have 2 questions. Both of them are relevant to profitability of food business. For the U.S., it's doing very well in terms of sales in the 2nd quarter. You have told us about the operating margin before PPA, but if we compare from last year, we would like to know how the profitability is moving in the U.S. My 2nd question is, right now, in the 1st and 2nd quarters, especially for food business in Korea, there are, you know, cost pressures and capacity pressures, and there has been some decline in profitability.
As we move into the third and fourth quarters, we would like to know how much of that cost pressure is likely to alleviate. We would also like to know how, I mean, what kind of areas do you see where we would be able to see more profitability drive?
All right. First, on the first question, last year, Schwan's PPA was about KRW 5 billion, if you look at U.S. as all, before PPA, the OP margin was 6.3%. If you do the calculation, this quarter it's 8.7%, there has been improvement of about 2.4 percentage points. As for the Korean business and the cost pressures regarding Korea business, we believe that there would be two factors. First, is that there would be the rise in the commodity prices, including grain, is now climbing down. Even so, if we think about the input costs-
We believe that our according to our projections, as we move into third and fourth quarters, there's going to be some improvement quarter-over-quarter. As a whole, if we think about it, if we look at the commodity prices in grains, it's likely to stabilize. If we think of our raw sugar, we feel that it's going to be higher than what we have projected. That's going to impact our input cost. Regarding this area, of course, we will do our best to save cost and raise efficiency, but at the same time, for these cost pressures, we would have to think about maybe taking some pricing actions for our B2B customers. That could be an example.
Another factor would be that if we look at the sales volume compared to the same period last year, it has been declining, it is declining until the third quarter. As you have seen in our trend, compared to the first quarter, if you look at the second quarter, the decline of sales volume has alleviated. As we move into third and fourth quarters, in terms of sales volume, we are expecting some improvement, especially led by processed food. We feel that there's going to be clear improvement there. Next question, please.
The next question is from Park Sangjun of Kiwoom Securities.
`I have some additional questions. Thank you for the opportunity. I have one question on grain price and another on financial structure. When we think about grain prices, it has...
It's going to take some time for grain prices to stabilize against our anticipation. If you think about the grain price trend in the second half of the year, we would like to know CJ's outlook, and we would like to know what kind of rationale you have for projecting such direction. At the same time, in Korea, if you think about it, in terms of taking pricing actions for both FI and processed food, there has been some impact from government regulations. I'm sure there are some hurdles there. We would like to know what kind of plans you have in mind to address these government regulations against potential increase in prices of products. Our second question is: you know, we have divested Jixiangju, and we feel that there's going to be inflow of some additional cash flow.
You know, considering the high interest rate environment, we feel that there are some certain increase in interest costs. We would like to know what kind of future plans you have for financial structure improvement, such as divesting non-core business. We'd like to know whether you can provide us with some guide on these areas.
Regarding the, your question on grain prices, you know, there's a lot of difficulties or surrounding projections of grain prices, granted. In the mid to long term, other than raw sugar, for corn, soybean, and raw wheat, there could be some volatility, but we feel that they are likely to stabilize in the near term. I think the hot topic here is, is about El Niño or climate change.
If we look at past experiences, when we have El Niño in full swing, Southeast Asia, India, and Australia are likely to experience droughts, and palm oil, rice or raw sugar from these regions, and some wheat even, are likely to be impacted. For wheat, you know, we have a lot of wheat suppliers across the world, so the impact may not be too visible. For other commodities, or there's also going to be recovery in supply in other regions by grain. When we consider the grain inventory status for wheat, corn, and soybean, we feel that in the mid to long term, they're likely to average down. As for palm oil, we feel that, you know, there's some possibility that their productivity or yields may go down, but that's going to push up the price of soybean oil.
From our business standpoint, it's going to be when we think about our cooking oil business and our Selecta business, you know, this could be a positive factor. As for raw sugar, there are uncertainties out there, but our projection is that right now, you know, right now, the price at this moment is already factoring in the impact from El Niño, and especially in areas like Brazil. If, depending on how a supply comes out of these major suppliers, there is some possibility that the price of raw sugar may slightly dip as well. I think that's what we can say for our grain prices projections at this point in time. As for profitability, internally, we are trying to streamline costs and operations within ourselves, and especially in manufacturing.
As mentioned earlier, the more sales volume we have, we have an increase in utilization rate, and that's going to work favorably against our fixed costs, and that's going to expand in the third to fourth quarters. As for SG&A, for one-off events, we have been continuously streaming, streamlining our efforts, streamlining to save on our SG&A. Through these efforts, we are trying to offset some of the burden in GP, burden in costs through GP. In terms of financial structure, your question on financial structure? In the second quarter, as of the end of second quarter, if you look at net debt, it's about KRW 6.7 trillion right now.
It's about KRW 6.78 trillion to be exact. By the end of the year, we would like to further lower net debt to make sure we are in line with the level as of the end of last year. We'll be looking into CapEx or other controllable costs or expenses, including working capital, to make that possible. Additionally, for our, for efforts to improve financial structure, including potential sales of non-core business, for as far as, as far as we know, we would be continuously looking into our portfolio and looking into their potential as well, as well as their future. We would be continuously looking into whether the assets we have now is critical to us or not. Of course, it is all going to depend on how these would be reviewed at the end of the day.
All right, due to time constraints, we'll just take 1 last question.
Well, there are no questions in waiting. For those with a question, please press star and press the number 1. We have 1 question. We have a question from Kim Jung-Wook of Meritz Securities.
Thank you for the opportunity for additional questions. I have 2 questions: Regarding your green price projections regarding raw sugar, you mentioned there are concerns over a potential increase. When we think about amino acid, I mean, raw sugar is the main ingredient, so we'd like to know how you're going to fend off the potential the impact of potential increase in raw sugar. For Jixiangju's divestiture, we feel that it's all part of your select and focus strategy in food business.
In the past, you know, you've had these strategies for White BIO, Red BIO, and Green BIO as grow, as your growth engines. We would like to know what kind of select and focus strategies you would have in terms of, you know, your growth momentum strategy going forward.
Regarding concerns over a potential increase in the price of raw sugar, regarding amino acid, we would be looking into alternative sugar that would be able to produce the same level of deliverables as it would have when we use raw sugar. For strains that we use, that, where we use raw sugar, we are looking into strains where we can have the same output with glucose.
So that's the kind of, you know, outstanding, technological, technological gap we are trying to engage in to ensure these alternative options. As for our new growth engine, regarding White BIO and Red BIO, regarding these businesses, of course, you know, well, so there are some areas where we have touched upon in the past, but if you look at in the second half of 2021, we have declared the CPWS strategy, and we talked about, you know, potential acquisition of, you know, assets outside. There's a lot of actions taking place. When we think about for any company regarding new growth engines, it would not necessarily have to do with, you know, short-term performances. Of course, short-term performance is important, but a lot of these efforts are approached from long, mid-to-long-term perspective.
Instead of, you know, making decisions or coming to conclusions right away, we would be taking step by step from mid to long-term perspective, and we are seeing some visible results. As for microbiome in Red BIO, last year, we've had the CJRMB-101 as part of our pipeline. We have received approval for clinical trials in Korea and the U.S. and in the U.K. We've also acquired assets from a company called 4D p harma, so we are taking a long-term approach, and it's the same for other businesses as well. When there are, you know, visible progresses, we will make sure to update you accordingly. All right. Without further questions, we will conclude today's call. Thank you everyone for your participation.