South Korea’s food giant CJ CheilJedang Corp. saw a 14.8 percent on-year fall in operating profit in the first quarter as rise in raw material and investment costs eroded gains from food business.

CJ CheilJedang in a regulatory filing on Monday reported its consolidated operating profit in the January-March period this year reached 179.1 billion won ($151 million), down 14.8 percent from the previous year. Its net profit plunged 43.3 percent on year to 40.9 billion won, while sales gained 15.4 percent to 5.02 trillion won during the period.

On Tuesday, CJ CheilJedang shares closed 3.35 percent lower at 288,500 won in Seoul trading.

The company attributed its profit decline to increased raw material prices and investment in its new manufacturing base in Jincheon, North Chungcheong Province. A spin-off of its biopharmaceutical business arm CJ HealthCare in April last year was another one-time dent on the income statement, the company explained.

Its food business saw a 14 percent on-year fall in operating profit that reached 100.9 billion won in the first quarter mainly due to investment in the Jincheon manufacturing base. The division raked in 1.72 trillion won in sales, soaring 30.7 percent on year on brisk sales of ready-to-cook meals and revenue from Schwan’s Company, U.S.-based frozen food maker famous for Mrs. Smith’s pies and Tony’s pizza it acquired last year. Sales growth in its Chinese and Vietnamese operations was also robust. Its food division profit contributed 56 percent to its total profit.

The bio business delivered an operating profit of 42.7 billion won, up 2 percent on year over the cited period thanks to a rise in sales of highly profitable products. Its revenue inched up 0.8 percent to 1.09 trillion won on robust nucleotide sales growth.

The logistics business posted an operating profit of 45.3 billion won, up 0.1 percent on year, with sales adding 21.5 percent to 2.43 trillion won.

By Cho Hee-young and Lee Ha-yeon

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