Ladies and gentlemen, I am Woo Won-sung, Head of IR Team and Finance Strategy. We'll now begin the Q1 2022 business results report for CJ CheilJedang. Let me remind you that Korean to English simultaneous interpretation will be provided for foreign investors. Let me first introduce CJ team. We have Mr. Kang Kyoung-suk, Head of Finance Strategy. Mr. Ahn Sung Jun, Head of Finance Planning. Mr. Kim Jong-won, Head of Food Korea Business Management. Mr. Cho Jae-bom, Head of Food Global Business Management. Mr. Han Kyung-uk, Head of Bio Business Management. Mr. Hwang Hyun-jo, Head of Feed & Care Business Management. Mr. Kang will first walk you through the business results, followed by sharing a progress on key strategy execution and outlook by respective presenters. We will then move on to Q&A afterwards.
Ladies and gentlemen, I am Kang Kyoung-suk, Head of Finance Strategy. Today's agenda includes Q1 highlights, earnings analysis by business unit, key indicator analysis, progress on key strategy execution, followed by Q2 outlook. Let us now flip to page five. In Q1 of 2022, CJ CheilJedang achieved 18% growth in sales year-over-year and 7% growth in OP. Despite decline in margin for food due to rising input costs, sales increased 13%, posting robust growth. Buoyed by expansion in K-food, Foods overseas sales continued two-digit growth. Thanks to a favorable market, Bio also continued high growth with differentiated competency in specialty products, diversified global presence and interoperable production. Feed & Care also turned to surplus with recovery in livestock prices and improved productivity enabled by biosecurity. Next page, please. Let's look at Q1 company-wide results excluding CJ Logistics.
Food focused on growing channels both in and out of Korea in line with changing consumer trends, and Bio actively led market in Q1. As a result, sales grew 18% compared to the same period last year to KRW 4.3186 trillion. Thanks to Bio's market dominance and robust sales in high margin regions, operating profit grew 7% compared to the same period last year to KRW 364.9 billion. For net profit, with increase in operating profit and improvement in non-operating income, it grew 6% compared to the same period last year to KRW 222.2 billion. When including CJ Logistics, sales grew 13% year-over-year to KRW 6.9799 trillion and KRW 435.7 billion in operating profit.
Let us now turn to page eight. Let's look at performance of each business unit. First up is Food. For our sales grew 13% year-over-year. In Korea, we focused on growing channels and accelerated growth, led by solid market leadership and new mega products. As a result, sales in Korea grew 12% year-over-year to KRW 1.433 trillion. For Food overseas, with continued growth led by Global Strategic Products, or GSPs, and focus on growing channels of each country, sales grew 15% year-over-year to KRW 1.1765 trillion. Operating profit declined 4% year-over-year to KRW 169.7 billion. In Korea, there has been continued efforts to improve operating profits across all value chains with cost-effective execution and pricing actions for some products to alleviate cost burden.
In overseas business, we also try to minimize cost burden arising from intensifying inflation with increasing sales volume, pricing actions for key products and cost structure improvement efforts. If you look at the bar graph on the next page, OP margin in Q1 was 6.8% when excluding Schwan's PPA, and 6.5% when including the PPA. Next is more details on Food sales in Korea on page 10. Product-wise, core products, namely Hetbahn, processed meat, Dasida, and HMR, have seen continued growth, along with accelerated growth in new products such as white meat, grilled fish, Chinese cuisine, and PlanTable. Channel-wise, we executed flexible strategy by channel in response to changing consumer trends and expanded consumer experience by channel. We also focused on responding to demand and reopening channels. Q1 sales in Food sales, Food Korea stands at KRW 1.433 trillion.
Now on to page eleven with more details on overseas business. In the US, we focused on scaling up GSPs through bibigo platform and driving growth led by Asian category. As a result, we grew 14% compared to the same period last year to KRW 915.3 billion. For Asia Pacific and Europe, we continued growth thanks to expanded sales of K-food in growing channels. China saw 15% growth thanks to positive sales of K-food, namely mandu and chicken, and continued growth at online channel. Japan achieved 31% growth on the back of leading market presence of core products and brands, namely miso and mandu. Europe also grew 36%. For the region as a whole, it grew 18% compared to the same period last year to KRW 261.2 billion.
Q1 Food overseas sales stands at KRW 1.1765 trillion. Next is Bio. Amid rising prices of raw materials, we passed on cost burden through prices of key products enabled by market leadership. We maximize profits by increasing sales of amino acids for feed such as lysine in high margin regions. Sales grew 39% year-over-year to KRW 1.0828 trillion, and OP grew 128% from the same period last year, with quarterly operating profit standing at KRW 175.8 billion. Product-wise, in ANH, we focused on sales of key amino acids, such as lysine in high price regions, and enabled operation optimized for each region, resulting in greater profitability. Technical marketing and special amino acid also had greater contribution to performance.
For HNH, we ensure profitability for nucleotides through long-term contracts with key accounts. In light of surging demand for TasteNrich from key accounts, we worked hard to expand supply. With continuous growth in demand for sports nutrition, we have also seen increase in both price and volume for arginine. For Selecta and others, we took pricing actions and expanded volume based on market dominance in SPC in light of strong soybean prices. On the next page, you can see Q1 OP margin at 16.2% with sales of high value-added specialty products accounting for 13% in sales, maintaining two-digit trend. Next on to Feed&Care. With surge in grain prices and increase in feed price, sales grew in majority of their regions. Rising commodity prices and high base effect of Vietnamese hog prices last year resulted in OP decline.
If you look at sales, it grew 7% year-over-year to KRW 626.3 billion. With increase in feed price and continuous expansion of high value-added aqua volume, feed sales rose, while livestock sales flattened due to a declining spread of Vietnamese hogs. For operating profits, it declined by 78% year-over-year to KRW 19.4 billion, largely due to high base effect of Vietnamese hog prices prior year and rise in cost, including feed. Despite decline year-over-year, it turned to surplus QOQ with recovery in demand in hog prices since Q4 of 2021. Product-wise, for feed, we took proactive pricing actions with rising commodity prices. We also experienced improved profitability with expanded sales of aqua feed.
For livestock, rise in feed prices and decline in hog prices dampened profitability, but production continued to improve with effective biosecurity performance. In Indonesia, despite increase in livestock costs, the government's culling program continued, contributing to maintaining high chicken price and hence strong sales. Let's now turn to performance of CJ Logistics on page 16. With improved market conditions both in and out of Korea and a continued effort to enhance profitability, CJ Logistics achieved growth in both sales and OP. Q1 sales gained 6% year-over-year to KRW 2.857 trillion, and OP grew 57% year-over-year to KRW 75.7 billion. On page 19, you can see SG&A non-operating income expenses excluding CJ Logistics. When you look at SG&A, labor costs increased by KRW 33.8 billion, and transportation costs by KRW 42.5 billion.
With cost-effective execution of resources, however, we achieved SG&A to sales ratio of 22.4%, down by 0.7 percentage point from the prior year. Non-operating income expense improved by KRW 7.3 billion year over year to -KRW 48 billion. For page 20, when including CJ Logistics, SG&A non-operating income expenses are largely affected by performance CJ , so I'll skip the details.
Next, moving on to key issues and outlook. On page 22, Food business in Korea. Good afternoon, this is Kim Jong-won, Korea Division's Business Management. As we enter the endemic stage, consumption trends will change with the recovery of the out of home sector. According to data of Shinhan Card, the out of home market sales in the Q4 2021 was KRW 29.6 trillion, which is already at pre-COVID level.
The offline segment sales is lower than pre-COVID level, but the sales of the food delivery segment has grown by fourfold, heading the recovery of the out of home segment. The endemic phase will drive up the total out of home sales, but a significant trade-offs between offline and delivery segments are expected. However, due to the rise of commodity prices and other costs, the price of processed foods rose 8.5% after COVID. Prices of out of home foods were also up by 8.7%, which all will impact consumption trends. We'll continue to monitor change in consumption trends in Korea and focus on growing channels to keep up with our outstanding growth momentum.
For B2B, we'll strategically respond by providing customized products and solutions to our key clients, while adding to our B2B brand to create brand equity and invigorating in-flight meals and presence in duty-free shops to deliver sales that outperforms the growth of the B2B segment. Online and CVS sales for the past three years have surpassed the growth of each segment sales, especially CVS is expected to continue its growth in the endemic stage, thanks to more outdoor activities. In this light, we'll continue to develop CVS exclusive products and strengthen strategic partnerships with key clients. Next up is U.S. Food business.
Good afternoon, this is Cho Jae-bom, Global Business Management. For pizza, with our premiumization efforts represented by Fully Loaded Pizza, Red Baron's market share stood at 16.8%, 1.2 percentage point growth year-over-year.
Mandu in the first 12 weeks of this year has seen sales growth of 49% in the grocery channel, including Pagoda sales. CJ Foods mandu sales, including bibigo's, it grew 70%. Schwan's food service business achieved a 49% sales growth in Q1. Mandu apparently is contributing to our broader presence in the catering and the restaurant channels. Besides mandu, all of our global strategic products continue to grow in the U.S. Processed rice, thanks to higher sales of Hetbahn and fried rice, it grew 66% in Korean won, and our new multigrain rice offerings will further add to the pace of the growth. Our multigrain precooked rice products contain two or more types of grains with a hint of salt and oils for flavors that cater to the local consumers' palates. There are four flavors available, brown rice, jasmine, quinoa, and wild rice.
Our differentiated R&D and manufacturing technologies allow optimal heat treatment and moisture control to deliver the soft texture and great flavors, and they've been favorably evaluated in a consumer blind test. The precooked rice market in the U.S. Is expected to be worth more than KRW 1 trillion by 2025, and demand for premium rice will also grow. To take advantage of this trend, we'll continue to turn our focus on the growth of Hetbahn in overseas markets with existing lineups as well as new products. Like rice, chicken and fried rice, thanks to higher consumer penetration, ACV grew 88% in dollar sales in Q1. Now moving on to key ESG updates. We're working on different initiatives on multiple fronts to realize our goal of carbon neutrality and zero waste by 2050.
One of them is building a facility to drive shift to biomass fuels at Korea's largest food smart factory, CJ Blossom Campus. As a first in Korea, we apply gasification to burn wood materials using low-temperature pyrolysis to convert gases into electricity and steam, which is at the core of a low-carbon clean energy system. The groundbreaking is slotted for 2023, and the startup of this facility in 2025. The annual GHG reduction is expected to be at least 40,000 tons with this facility. There are other initiatives focused on environment. We reclaim post-consumer Hetbahn bowls as part of the campaign to recycle plastics. We directly collect post-consumer Hetbahn plastic bowls that are recycled but often go to waste, and we process them into trays for holiday gift sets and sustainable pallets for logistics.
We recently launched an upcycled food brand, Excycle, and its first product, Excycle Basak Chip. It's made of broken rice and okara, both side streams generated during manufacturing processes of Hetbahn and Happy Bean. The products contribute not only to reducing food loss and waste, but also invigorating resource circulation as it recycles PET bottles for packaging. The debut is through Wadiz, a crowdfunding platform in Korea, and distribution will kick off in the second half of this year. We'll now move on to the Q2 outlook. In Korea, on-trend product expansion in growing channels and a pricing normalization will further reinforce sales growth, but inflationary pressure is here to stay. Therefore, the impact of higher commodity prices and other costs will continue.
We'll act quickly to respond to change in consumption trends in the endemic phase, reinforce total cost management, including profit structure and transformation, as well as growth engines for future growth, such as health food and alternative meat to offset external challenges. In the overseas market, we'll take advantage of the reopening of the economy and a broader Asian menu portfolio to expand the presence in B2B, expand velocity and distribution of K-food in the grocery channel, debut new premium pizza, and take pricing actions to retain the growth momentum. In Japan, we expect to further diversify the product types and channels for Micho as the peak season nears, while bibigo mandu sales is likely to increase. In China, we'll focus on Gen Z for brand matches, for broader occasions for K-food, and solidify presence in online platforms such as TikTok to support growth.
For Bio, animal nutrition will have to cope with continued inflation in ingredient and transportation costs, but our presence in overseas markets and flexible manufacturing will allow agile operations by region and price leadership, which will help solid performance. The human nutrition business, due to lockdowns in China, may be faced with lower demand, but long-term contracts with large-scale key accounts will result in gradual recovery of demand for nucleotides and the sales growth of solutions that use premium ingredients like TasteNrich, which will together help the business grow.
Feed & Care will be affected by the higher pork price than that of the same period last year, but a series of pricing actions that incorporate grain price inflation and a higher share of high-profit feed offerings and the rebound of breeding prices with a recovery of the demand in Southeast Asian states such as Vietnam are likely to result in an improved profit in Q2. We expect to, you know, record the two-digit growth and the OP of 8%. That's the end of the prepared presentation. We'll now take questions.
Q&As in Korean will be translated simultaneously, and Q&As in English will be translated consecutively. We'll now begin Q&A session. If you have any questions, please press star and number one. If you want to cancel, please press star and number two. We have the first question from Meritz Securities, Mr. Kim Jung Wook. Kim Jung Wook from Meritz Securities.
Thank you for the opportunity. Thank you very much for the presentation. In processed foods, it's quite impressive how the sales has grown. So if we think about if we divide it into volume and pricing actions, I want to know about the mix, and we want to know whether such high growth can continue into the second quarter and the next. My second question is, I mean, there's going to be increasing burden from commodity price inflation.
If we think about the outlook for the second half of the year, we would like to know when we would be able to see less burden from rising input costs. We would like to hear more from you on that. Finally, Bio overseas has shown very good results, and I think the market has been very good. I think it was largely affected by that. After the second quarter, we would like to know whether there's any potential for changes in market condition. If you think about the capacity of competitors, we would like to know about your outlook for the second quarter and the third quarter, depending on how much capacity is picked up by competitors. Thank you.
First up, on the first question regarding the growth outlook of processed food. In the first quarter, if you look at Korea sales, it grew 11%. All in all, if we break down where the growth came from, 1/3 has come from volume increase and 2/3 came from pricing actions. That's how we can divide up the sales growth. If we divide it between FI, I mean, food ingredients and processed food, we feel that, you know, 80-30% of the increase came from pricing actions for processed food. For food ingredients, there has been a lot of commodity price increase, so a lot of it came from pricing actions for food ingredients. Of course, you know, there's going to be persistent input cost burden, so we would be translating that, some of that into pricing actions.
In the future, we feel that there's going to be a higher contribution of pricing actions in total sales increase in the remainder of the year. In terms of commodity or ingredient prices, we use a lot of raw sugar in our products, and in maybe India or Thailand, there has been stable production, so the price has came down a bit. Because of the Ukraine crisis, there has been increase in oil prices, and with stronger hail, the prices are going up again. For grains, because of the Ukraine crisis, we are expecting concerns over the supply, so the price is going to shoot up. In the second quarter, adding on to these risks plus the climate risks in South America, we feel that the price is going to continuously increase.
Amid, you know, potential recession in the global economy with concerns over inflation in the U.S., there's concerns over stronger dollar, so there could be some that could somewhat curb the increase in commodity prices. Up until the third quarter, of course, the prices are likely to go up, and after the fourth quarter, we feel that there would be other variables at play. Ahead of such increase in ingredient or commodity prices, we are trying to develop alternative ingredients and diversify suppliers of these major ingredients. We are trying to leverage hedging strategies, including options. Of course, we are trying to raise productivity across all value chains and making sure that we can improve our cost structure with total cost management, including SG&A.
As for the question on Bio business, so the amino acids, including lysine, the market has been very good, and that, I mean, of course, the numbers speak for itself. But rather than China, competitors from China, we have, you know, presence in North America and Europe. With increasing grain prices and ocean freight increases, we have been able to leverage our market presence with diversified sites across the world. In the third quarter, we feel that based on good market conditions, even when Chinese competitors raise their utilization rate and expand their exports based on our diversified presence across the world, and if we can maintain our numbers, we feel that even in the third quarter, we will not be heavily affected by changes in market conditions.
We're not really anticipating that, and we feel that the possibility of that happening is quite low at this point in time.
We'll take the next question. If you have questions, please press one and press star. The next question is from Mr. Park from KB Securities.
Thank you for the opportunity. Just like you mentioned, are there concerns over continuous commodity price inflation? In processed food, we want to know whether you need additional pricing actions for processed food, and if needed, do you think you can actually implement on that pricing actions for processed food? My second question is, for Bio, usually the performance is, I mean, it's much better in the first half rather than the second half, but you mentioned that, you know, it's going to be okay in the second half. We would like to hear more about the outlook for the second half of the year for Bio.
If you look at the first quarter performance, the operating profit in food has declined year-over-year, and that's largely because of the increase in input costs. That was one of the main reasons why there has been decline in operating profits. We will do everything we can to make sure that we can be very cost effective in terms of purchasing, and we will be continuously engaging in cost reduction efforts.
At the same time, there would be inevitable cases where we would have to take additional pricing actions. As for your question on Bio business, the performance have been very good for Bio. Regarding the annual guidance, that's how we interpret your question. Regarding the annual guidance, after we give out the official guidance earlier this year, earlier any year, we don't really revise that throughout the year. If we look at the performance in the first quarter as well as the outlook for the second half, I think you can make your own estimations regarding how the business will unfold for the rest of the year.
We'll take the next question. Next question is coming from Ms. Han Yoo-jung from [Patients Creative].
Thank you for the opportunity to ask a question. Thank you for your presentation as well. We see a limited growth, top line growth of Schwan's. Could you actually elaborate further on the top line growth, estimated growth of the top line of our Q1 of Schwan's? OP margin that has improved a little, and then does that come from the Korea or does that come from overseas markets?
Regarding the question on the Schwan's top line, Schwan's has the home service business unit, but consumer brand and FS businesses, they have been recording a double-digit growth. But home service, it's been carved out, but it actually delivers to consumers' homes directly. But because there has been a COVID impact and also a decline in demand, so that actually led to decline in performance locally.
The food service and consumer brand of Schwan's food service. It's a B2B pretty much, for example, K12. Because we're seeing the recovery of food service demand, and then also there has been a higher growth of the mandu. We saw 30% growth of food service business. B2C or consumer brands, mandu, chicken and fried rice, K-foods distribution and velocity have been on the rise. Pizzas sales also has grown by 10%. For Q2, grocery channel sales, K-food sales will grow in the grocery channel. With the recovery of the economy and reopening of the economy, we expect to see higher sales of Asian food in B2B.
We'll continue to see growth and upward trends overall. Regarding operating margin of food, we saw most of the decline comes from Korea business, especially food ingredients due to the inflation of commodity prices.
Next question comes from [Ms. Kim Hyun] from Morgan Stanley.
Good afternoon. I have three questions. One is regarding Bio, and Bio's OP is very impressive. If things continue like this, we see that things are looking up and that things are looking rosy for the remainder of this year, but you have different products, nucleotides or lysines. Could you actually elaborate on the contribution of these different products to the growth?
Second on Feed&Care and hog prices in Vietnam that are going up. Under the current circumstances, would you think that performance will improve further in the next quarter and the remainder of this year? Third, the borrowings, actually, net borrowing has actually exceeded about KRW 6 trillion . What are your controls and what are your measures to actually have that under control?
On your first question on Bio, question had to do with contribution of different products to our operating profits. On the first quarter, operating profit grew year-on-year, but the lysine mainly led the profit and soybean oils and then also trehalose and the nucleotides and TasteNrich, they've also contributed to the growth of our operating profit. On your second question, commodity price increase means that our breeding cost of COGM will also grow. We believe that the hog prices will go up as well. We believe that profitability in Vietnam will grow further into the second quarter. Regarding the question on net borrowing. Net borrowing by the end of the first quarter was KRW 6 trillion. That is about a KRW 700 billion increase. That has to do with the geopolitical crisis.
That is due to an increase in the working capital and, inventory, related expenses. To respond to, potential external, shocks or factors, we have our measures set in place. We believe that, we, are already, to some degree, and then we will try to keep, our financials, solid and, sound.
We'll move on to the next question. We have Mr. Park Sang-joon again from KB Securities. Please go ahead with your question.
Thank you very much for the opportunity again. I have two additional questions. First has to do with Schwan's. When you talked about Schwan's, you talked about food service and consumer brands as well as home service. You mentioned that there is, you know, discrepancies in sales growth depending on different business units. We would like to know how the differences in sales growth rate translate into their profitability. My second question is for food overseas. I hear that there would be expanded lines. Regarding the capacity line timeline, we would like you to give us a short update on that.
For home service of Schwan's, when we acquired Schwan's in the past, we decided to carve-out home service. That's carved out from our transactions with Schwan's. Our business is largely relevant to food service and consumer brands in terms of sales and production. As for home service, it's just we're just focusing on supply to home service. We do not have, you know, margin calculated here.
We're just manufacturing and supplying to home service. There is minimal impact from any difference in coming from home service to our profitability at Schwan's. As for the capacity expansion plan for food overseas, just to give a brief overview. Right now, one of the key growth drivers of our business overseas are K-food, or what is known as GSP, or Global Strategic Products. With continued high growth of mandu in the U.S., in the West, we have our plant in Beaumont, and we would be implementing an innovative line of three-tier mandu line, and it's going to go into operation at the end of the year. That's our target.
In Vietnam, we, in order to tap the halal market, are looking into ways to make halal-certified K-food, and that's what has been widely covered as Kizuna plant in the media, which is solely in charge of making K-food in Vietnam, including kimchi and mandu.
Due to time constraints, we will just have one more question. We have no questions waiting. If you have any questions, please press star one. The next question is from Mr. Kim Jung Wook of Meritz Securities. Mr. Kim Jung Wook? Kim Jung Wook?
Thank you for the additional opportunity. Now that I'm looking through the handout, there has been a lot of increase. You mentioned there was increase in labor cost and transportation cost. Please elaborate more on that increase.
We would like to know whether that's going to continue into other quarter, in the following quarters as well. Additionally, for White Bio, I would appreciate if you can share with us any updates on White Bio. As for your cost outlook, you mentioned that there's going to be some burden on profitability for food business. Are we going to expect it until the third quarter? We would like to hear about your take on that.
Regarding the first question on labor cost and transportation cost and SG&A, for labor cost, compared to the same period last year, there has been certain increase. If you look at the total, a share of total mix, it has actually gone down by about 0.4 percentage points compared to the same period last year.
If you look at why there has been increase in labor cost, there has been basic salary increase, and there has been some revisions through our existing compensation scheme. We've also had Bioscience and Wellcare, so we've had acquisition of these new entities. As for Schwan's, due to continued COVID-19, there has been additional labor costs arising from that. Of course, this is likely to persist for a while, but by reducing SG&A, just as we have been able to reduce SG&A this quarter, we will try our best to make sure that we can be more cost-effective and further reduce SG&A.
As for transportation costs, there has been slight increase, but this is actually a trend that has been witnessed from past year with the skyrocketing ocean freight charges, as well as the increase in freight costs in Bio. They have contributed to such rise in transportation costs. We feel that, you know, Bio had been taking pricing actions accordingly, so it's not going to be much of a burden. As for the second question on potential updates on White Bio business. As for White Bio, just as we have mentioned before, we would be going into main production in the first half of the year. There's no setback there. The products that come out of main production will be tested. Considering that testing period, we feel that sales is going to be generated from the second half of the year.
As for the third question regarding whether the cost burden is likely to persist into the third quarter, as mentioned earlier, we have been looking into grain price increases, and we feel that there are going to be factors driving up our costs. As mentioned earlier in our presentation, we have been making efforts to reduce costs across all value chains. For inevitable cases, we would be taking additional pricing actions to make sure that we would be able to minimize such burden as much as possible.
With that, without further questions, we will conclude today's conference call. Thank you everyone for your time.