NHN like other Korean platform majors report plunge in income from spike in expenses

2022.08.10 13:34:34 | 2022.08.10 15:58:49

[Source: NHN Corp.]이미지 확대

[Source: NHN Corp.]

Surge in expenses has weighed down on Korean platform majors as they vie heavily in marketing and payroll.

NHN Corp. on Tuesday reported a disappointing operating profit as its swelled expenses erased some of its brisk sales, a common event that has affected platform leaders Naver Corp. and Kakao Corp.

NHN, a Kospi-listed game and internet service provider, disclosed that its operating income was estimated at 5.2 billion won ($3.98 million) for the second quarter ended June 30, 2022. The result is down 66.5 percent from the previous quarter and 73.9 percent from a year ago.

Revenue came to 511.3 billion won, down 1.8 percent on quarter but up 12.8 percent on year.

NHN shares fell 1.20 percent to close at 28,800 won on Wednesday.

Its disappointing operating profit was mainly due to its large marketing cost to promote its e-comics platform in France and new mobile games, said NHN.

Ahn Hyun-sik, NHN chief financial officer, said the company spent largely on marketing activities for web games and new branding to expand its market share as part of the long-term growth plan.

Its operating expense jumped 16.8 percent on year to reach 510.6 billion won. The company spent 37.4 billion won on advertising in the second quarter, up 78.1 percent on year. Payroll expenses also rose 8.4 percent on year to 100.5 billion won.

To bolster its stock, NHN announced in a separate filing on Tuesday that it will cancel treasury shares worth 110 billion won in total, with a plan to retire 43 billion won worth of treasury shares on Aug. 17 first. It will additionally retire up to 10 percent of its entire shares in circulation by 2024 to improve shareholders’ value. It is the first time NHN to retire shares since its foundation.

Internet giants Naver and Kakao also have disappointed investors after reporting earlier this month that their operating profit plunged in the second quarter despite their upbeat top-line figures. They blamed large marketing and payroll expenses for the disappointing operating income.

By Oh Dae-seok, Jin Young-tae and Cho Jeehyun

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