Will CJ CheilJedang pursue large-scale investments?

CJ CheilJedang's corporate logo / Courtesy of CJ CheilJedang

By Kim Jae-heun

CJ CheilJedang had a banner year in 2020, achieving a record-high operating profit of over 1 trillion. What is more surprising is that the stellar earnings came only a year after parent company CJ Group initiated emergency management measures due to its heavy debt load.

The group is still continuing efforts to improve its finances, but earnings at the food division have recovered enough for it to consider new investments.

All eyes are now on where the company plans to conduct these to fuel future growth.

CJ CheilJedang emphasized that it plans to strategically utilize its assets, while staying clear of risky ventures. Instead of investing in new production lines or acquiring rivals, the company said it plans to focus on brainstorming new products or establishing new retail channels.

The company's financial status has now recovered to levels seen before the costly acquisition of American frozen food manufacturer Schwan's Company in 2018. CJ CheilJedang spent 1.5 trillion won for that acquisition aimed at expanding its presence in the U.S. market. But the move placed a huge financial burden not only on the food subsidiary, but on the entire conglomerate. CJ Group saw its debt load increase to more than 11.2 trillion won in the first half of 2019.

This forced CJ Cheiljedang to get rid of unprofitable businesses and focus on its mainstay operations, while selling off real estate assets, including factory sites in Gayang-dong and Guro-dong, both in Seoul. The company also stopped investing.

In 2020, CJ Cheiljedang's annual sales reached 14.16 trillion won, with an operating profit of 1.04 trillion won, excluding earnings at affiliate CJ Logistics. CJ CheilJedang's borrowings also decreased by 600 billion won to 4.22 trillion won.

“Nothing has been decided in terms of specific investments, but we will only spend money in essential areas,” a company official said.

In the food business, CJ Cheiljedang plans to focus on building new retail channels, come up with new products and forge more business-to-business supply contracts.

In the bio-industry, the food firm is taking steps to manufacture an eco-friendly plastic material called polyhydroxyl alkanoate.

Kim Tae-hyun, a researcher at IBK Securities, said the outlook for CJ CheilJedang's business this year is positive considering its flourishing food sales in the United States and China.

“The company's consolidated sales and operating profit are expected to reach 25.44 trillion won and 1.43 trillion won, respectively,” Kim said.