Good morning, everyone. I am Lee Eun-ho from the IR team at CJ CheilJedang. Thank you for joining the Q3 2025 earnings conference call. Today's session will be interpreted simultaneously into English for our foreign investors. Please note that today's presentation materials include forward-looking statements, which may change depending on future business conditions. Additionally, these materials are subject to adjustments during the external auditor's review process. Let me now first introduce the CJ team attending today: Mr. Chun Ki-sung, Head of Corporate Finance, Mr. Kwon Kyung-min, Head of Finance, Mr. Kwon Tae-ho, Head of Food Business Planning, Mr. Chun Sun-ho, Head of Food Korea Business Planning, Mr. Kim Jang-hyun, Head of Bio Business Planning, Mr. Hwang Hyun-jo, Head of Feed and Care Business Planning. Today's agenda is as follows. First, Mr. Chun Ki-sung will present the Q3 business results and review.
Following that, each business unit will share updates on key strategic execution and outlook, and then we will conclude with a Q&A session.
Good morning, everyone. I am Chun Ki-sung, Head of Corporate Finance at CJ Cheiljedang. Today's presentation will cover highlights of Q3 2025 earnings, performance analysis by business unit, and updates on key strategic initiatives and outlook. Let's begin with the corporate results for Q3 2025, excluding CJ Logistics, as shown on page five. Food business unit achieved sales comparable to last year, but a slowdown in bio and feed and care led to a 1.9% year-on-year decline in total corporate revenue, which stood at KRW 4.5326 trillion. Despite improved profitability in the food business unit, OP fell 25.6% YOY to KRW 202.6 billion, with an OP margin of 4.5%, primarily driven by unfavorable market conditions for bio and F&C.
Also, due to reduced foreign exchange gains caused by a higher exchange rate, net profit dropped by 66.4% YOY to KRW 46.1 billion. Including CJ Logistics, the total sales in Q3 2025 increased 0.3% YOY to KRW 7.4395 trillion, while OP decreased 15.9% to KRW 346.5 billion. On page seven, let me share performance analysis by business unit. First, for food business unit, sales increased 0.4% YOY to KRW 2.984 trillion. GSP products such as Mandu and shelf-stable rice maintained solid growth in major global markets like the US and Japan. In Europe, growth continued with the expansion of new mainstream channels. In Korea, sales slightly declined due to setbacks in gift set sales during the extended Chuseok holiday. OP rose 4% YOY to KRW 168.5 billion. In global markets, cost optimization in China led to a turnaround. However, raw material cost pressures in the US
and increased promotional expenses in Japan and Europe weighed on profitability. Meanwhile, in Korea, processed food sales volume increased, and FI reduced the soybean processing volume and streamlined the costs, thereby improving the profitability. Next, let me share detailed sales performance of food business unit. First, global food business sales grew 4% YOY to 1.4554 trillion KRW. In the US, pizza sales remained steady, while sales of key GSP products such as chicken, frozen rice, and shelf-stable rice increased, driving a 3% YOY growth. Japan maintained solid growth with Mandu sales expansion. China saw increased sales of key products including Dashida and frozen rice balls. Europe achieved double-digit growth through channel expansion. Oceania continued its upward trajectory with broader GSP listings in mainstream channels. In Korea, sales declined 3% YOY to 1.5286 trillion KRW. Processed food sales slightly decreased despite overall volume growth due to weaker Chuseok gift set sales.
FI sales dropped by 5% due to reduced demand for gift set and lower soybean meal sales. Next is Bio business unit. Bio sales decreased 8% YOY to KRW 979.4 billion, impacted by intensified competition in specialty products such as arginine and tryptophan, as well as high base effects from the previous year. OP declined by 72% YOY to KRW 22 billion. High-margin products like tryptophan, arginine, and nucleotides experienced price reductions driven by intense competition, resulting in a decline in profitability. Next, let me share details by product of Bio business unit. First, for animal amino acids, lysine prices declined as Chinese lysine products grew despite anti-dumping duties in Europe. Tryptophan and specialty amino acids also faced a setback due to high base effects from last year and increased supply compared to last year.
Selecta SPC, or soy protein concentrate prices, fell versus last year, but rising demand for soybean oil following global biodiesel expansion drove price increases, partially offsetting the impact. Next, taste and nutrition items, which are seasoning and nutritional solutions. Nucleotides prices continued to decline amid intensified competition and China's economic slowdown. TasteNrich, our next-generation plant-based fermented seasoning boosted sales volume by creating new demand based on tech and marketing competitiveness. However, higher costs for customized product development and production weighed on the profitability. Next, on page 11 is the feed and care business unit. Due to seasonality and weaker demand in the Vietnamese market, livestock prices dropped. Therefore, F&C sales declined 2% YOY to KRW 569.2 billion. Despite improved profitability in the feed business, livestock prices in Vietnam remained weak due to abnormal weather conditions, so OP dropped 63% YOY to KRW 12 billion.
Next, let me share details by F&C business. For the feed business, the efforts to strengthen quality management and boost sales in non-integrated markets helped underperforming products achieve the turnaround. Sales growth with major customers ensured stable profits, while steady raw material prices and recovering feed sales in Vietnam improved performance. For livestock business, despite strong cost competitiveness in Vietnam, profitability declined due to seasonal price drops. Meanwhile, Indonesia saw a rebound in livestock prices driven by chicken supply shortages, resulting in a turnaround. Let me now move on to CJ Logistics. Sales grew 3% YOY to KRW 3.0666 trillion. Despite a slowdown in global markets, growth was led by parcel and contract logistics, supported by high season for parcel delivery, increased fulfillment volumes from key shippers, and expanded 3PL customer volume. OP increased 4% YOY to KRW 147.9 billion.
Leverage from parcel volume stabilized 3PL customer operations in CJ Logistics, and price hikes in the port business offset challenges in the global markets, allowing us to sustain profitability. Let me now move on to the key strategic initiatives and the forecast. First, let me walk you through the progress and outlook of food business.
Good morning, everyone. I am Kwon Tae-ho from Food FP&A. Let me tell you about the progress and outlook of food business. Our global business is maintaining rapid growth in key countries, including Europe, through mainstream expansion and category growth. As of Q3 2025, CJ CheilJedang has entered five countries in Northern Europe and boosting mainstream distribution. CJ CheilJedang launched a new noodle product in the UK, and in Greece, has become the first Asian brand to enter the mainstream channel. The number of countries CJ CheilJedang is playing increased from 20 in 2021 to 27 in 2025.
During the same period, the sales in European countries have stayed strong, with the average CAGR of 31%. The global food business is showing constant growth thanks to GSP sales increase. Mandu, the most representative category, enjoyed distribution expansion across the mainstream channel in Europe and is expected to grow further, backed by local manufacturing and stable supply in Japan. In order to cater to diversifying consumer needs, CJ CheilJedang is expanding convenience portfolio, including frozen rice, shelf-stable rice, and frozen kimbap. Leveraging the growing popularity of Korean street foods, CJ CheilJedang will continue sustaining solid growth in the global market by strengthening strategic products like tteokbokki and Bungeoppang . Next is on key products of Bio.
Good morning, I am Kim Jang-hyun from Bio FP&A.
Despite the anti-dumping duties imposed by Europe on Chinese lysine, lysine prices are dropping continuously due to the increase of Chinese-made products affected by intense competition in China. Amid the global spread of protectionism, CJ will respond flexibly, leveraging diverse local manufacturing bases. However, lysine prices are not expected to recover in the shorter term. The price of tryptophan, one of CJ's high-margin products, continues going down as well due to fierce competition. The price volatility is likely to deteriorate. CJ will make the best use of the high market share and tech competitiveness in tryptophan to ensure efficient and strategic pricing and increased sales volume. Next up is Q4 outlook. First is the global food business. The US
is expected to see top-line growth backed by year-end high season performance and GSP sales increase, but still needs to navigate through the uncertainties related to cost hikes such as raw material costs. In Japan and China, we'll maintain the growth by boosting core products by country and expanding coverage. Business areas like Europe and Oceania are expected to show rapid sales growth thanks to the distribution of GSPs such as Mandu, chicken, and noodles to the new channels and entry into more countries. In Korea, despite the efforts to streamline the cost because of the timing difference of Lunar New Year and raw material cost increase compared to 2024, the sales and OP both are expected to drop year over year. As for Bio, as supply increase of Chinese players leads to a fiercer competition, profitability improvement is expected to be delayed.
All in all, in Q4 2025, excluding CJ Logistics, the sales of CJ CheilJedang will grow by a low single-digit and OP margin by 3% year- over- year.
This is it for the presentation. Let's move on to the Q&A session. Let us begin Q&A. For those with a question, please press star and the number one. If you want to cancel, press star and the number two. The first question is Park Sang-wook from Kiwoom Securities.
Thank you for the opportunity to ask a question. My first question is, the market conditions of bio products are expected to be slow. And how long is it going to be extended? The bad market conditions. And also, is there any measure that you are taking to defend against such slowdown, such as new product or pricing actions?
My second question goes. I would like to ask you about the CAPEX executed this year and the next plan. The net borrowings are going up. Of course, there was a business sold recently. But I would like to know about the CAPEX execution status and plan for the next steps because of the burdens in financial structure.
Let me answer your questions about bio business. As you just mentioned, because of the supply increase, mainly driven by Chinese suppliers, yes, the market conditions are worsening. And yes, it is expected that the Q4 decrease is going to be extended because we are at the range of the adjustment of amino acids. So there are four things that CJ CheilJedang is focusing on. First is market conditions. The soybean meal market prices are recovering to the similar level compared to last year.
This is a signal for recovery of demand. We are seeing positive signals of demand recovery. That's one. Second, raw sugar. The raw sugar prices are gradually going down. We would like to utilize. I believe this is a weapon for us in our arsenal to back our manufacturing competitiveness. And the third one is AI-driven transformative processing methods, which is differentiation point of ours. We believe we are taking another approach, which is different from the past methodologies. And the fourth is optimize manufacturing allocation so that we can efficiently and effectively reallocate our resources in manufacturing so that we can focus on high-margin products. About CapEx, I would like to answer your question. In 2025, on an annual basis, it is similar to 2024 level. It was expected at KRW 1 trillion. And by Q3, we have executed a certain amount of CapEx.
If you consider the Q4 amount of CapEx, then it's going to be similar to the level of 2024. As for the net borrowings, this is similar to the level at the end of 2024. Thank you for your question.
We will take the next question. Next question is from Kim Jung-wook from Meritz Securities. Please go ahead.
Thank you for the opportunity. First, I have a question about the food business in Korea. When we forecast the Q3, we expected the impact of cash voucher and the recovery of the economy, but there was a setback in gift sales. Excluding gift sales, what about the sales of processed food in total? We are expecting the similar trend in the Q4. How much should we expect about the Q4 in the forecast?
And second question is that in the U.S., there are some burdens in the raw material costs, and key material costs are going down right now. So I am wondering the timing of raw material cost burden that is taken into account to your performance, both in Korea and the global markets. And the third one is about bio. You mentioned the four factors for recovery. But when we think of the strategies, there are some chicken games going on in the bio industry. So I am wondering about the competitive landscape right now. Do you think that competitors are shifting their strategies? And what do you think of the recovery timing of the market conditions?
Hello, this is Chun Sun-ho, Head of Food Korea Business Planning. So let me tell you about the Q3 performance. The decline of sales worsened because of the offline sales.
The online shift was increasing the sales, but the sales growth was at low single digits. This kind of trend is expected to be maintained in Q4. For gifts, that is expected to grow at low single digit YOY. Next question about the US and the raw material costs. The raw material cost burden in the US is not because of a certain raw material, but because of the tariff impact this year. Most of raw material costs are increasing these days. When we look at the U.S. economy, inflation is high and labor market has been stringent. The manufacturing cost has been increasing so far. We have been responding to that based on the sales volume increase. Secondly, we tried to reduce and streamline the logistics cost and also COGM as well as fixed costs.
So we started such efforts this year. So from next year, the efforts results will be realized. So the raw material cost increase will be lower down next year. And let me tell you about the bio business unit. When we look at bio competitors, they are struggling with the worsening profitability these days, as far as we are aware. So CJ is going to make an opportunity out of this crisis so that we are going to widen the price cost spread and also execute some internal initiatives and strategies in earnest. We are looking for a way right now. And the thing is, we are going to focus on key products to solidify our market leadership as much as possible. And that's going to be the strategy going forward. Thank you. We will take the next question.
The next question is from Kim Hae-yeon in Morgan Stanley.
Hello everyone. Thank you for the opportunity to ask a question. I have a question about food. You mentioned briefly about the processed food in the Korean market. As for the gift sets, is there any one of concern, including the return of gift sets? And my second question is as follows. Because of the pipeline in the US, you went through some sales setback. Then starting from Q3, is everything normalized? And I have one more question. As for bio, actually, this kind of margin rate is something unprecedented. And I believe you are seeing some difficult times in lysine and tryptophan. But I believe you were able to defend against the market condition in nucleotides. So I would like to know some details about the performance of nucleotides and Selecta in Q3. And one more thing is about feed and care.
So when is it going to be reflected as the income from discontinued operations? And also, I would like to know about the borrowings regarding the F&C business.
I am Chun Sun-ho from FP&A in Korea Food Business.
Let me answer your question about the gift sets. The costs are reflected in October, and this is going to be similar to the 2024 level. So yeah, we believe the profitability is similar to 2024.
I am Kwon Tae-ho, Food FP&A. About the pipeline in the U.S. Starting from Q3, all the manufacturing and production are normalized. However, the distribution timing and listing timing is a little bit delayed, but still the normalization is ongoing, is on track. And we believe this is on the growth trend. And by Q4, I believe we are going to recover the pre-shutdown level. But actually, the pizza market itself is not growing at all.
Health and wellness concept or functionality concepts are going to be added to our pipeline portfolio so that we can drive future growth and transformation. Next is bio. As for nucleotide, the recovery of demand in China is slowing down, and also, the domestic slowdown is impacting our business. But we can continue driving growth in our sales so that we can recover and stabilize our profit, and it is still ongoing, and as for Selecta, the soybean oil is increasing because of the biodiesel expansion, and the soybean oil prices went up dramatically, and the SPC price adjustment is being offset, so we are improving profitability year over year. The last answer is about F&C. Starting from Q4 2025, it is going to be reflected as the income from discontinued operations, and assets held for sale, and the borrowings, we cannot provide specific numbers.
But we are going to get back to you once everything is confirmed. We believe the improvement is about KRW 700 billion. The next question.
Next question is from Park Sang-Wook from Kiwoom Securities. Please go ahead.
Thank you for the opportunity again. On page 17, there is Q4 forecast. The corporate sales growth is expected to be a low single-digit % and OP at 3%. And when F&C is reflected as asset held for sale, then the numbers would be different. But the guidance that you are providing is excluding F&C. And I mean, is it excluding F&C right now so that we can compare this apples to apples?
Let me answer your question. The Q4 guidance includes F&C performance. But even if we exclude the F&C, the numbers and the guidance on the stack is not that much different from the inclusion. And we will take the next question.
We're hearing none. If you have any questions, please press star and the number one. We will now wrap up the Q3 2025 earnings report of CJ Cheiljedang. Thank you very much for attending today's session.