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August 23, 2019

Kolmar Korea under pressure despite swift risk management

PUBLISHED : August 12, 2019 - 16:56

UPDATED : August 12, 2019 - 22:19

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Despite the chairman's apology and resignation for showing a controversial far-right video to employees, shares of Korea Kolmar, a cosmetics and health care company, continued to fall on Aug. 12 as consumers turned their back on its products.

On Aug. 11, just two days after the media reported that Yoon played a YouTube video denouncing the government with controversial comments including hatred, misogyny and vulgarity in front of hundreds of employees, the president apologized for his behavior and stepped down from his post amid severe criticism. 

Yoon Dong-han, chairman of Kolmar Korea, vows in apology during a press conference on Aug. 11.
Yonhap


 
Related:
Kolmar Korea president resigns, apologizes for controversial video
Kolmar Korea shares plunge amid criticism over president’s behavior


But his apology has so far failed to stop a boycott campaign against the company’s products ranging from cosmetics and health care supplements, nor has it prevented the company’s share price from falling.

After falling as low as 3.98 percent in morning trade, the Kospi-listed company’s shares closed at 46,900 won, the lowest since early 2015, decreasing 1.78 percent. The fall added to a 4.88 percent decline it saw on Aug. 9 when media reported on the matter. Kospi-listed Kolmar Korea Holding also inched down 0.5 percent on Aug. 12. The benchmark Kospi edged up 0.23 percent to 1,942,29 points on the same day.

Some analysts see the boycott may not continue for long considering the company’s business-to-business nature, others see the swift reaction might not turn out to be as effective as the company expects.

“It was unexpected that he would not only apologize but also resign from the post,” Park Joo-geun, the president of CEO Score, a local corporate tracking site, said. “But without a detailed promise to prevent similar incidences, it might not be enough to stop this crisis,” Park said.

Even if the company’s measure was enough to calm down angry customers, the upcoming announcement of the second-quarter results might not help.

KB Securities said that the company’s revenue and operating profit is expected to miss market consensus by 3 percent and 6 percent, respectively, due to a slowdown in the cosmetics sector and business in China. “Kolmar Korea is forecast to turn in consolidated revenue of 409.9 billion won, up 14 percent on-year and operating profit of 33.1 billion won, jumping 35 percent from a year ago, missing market consensus,” KB Securities analyst Shinay Park, said. KB was one of the four companies that cut the target price of the company by 9 percent to 80,000 won.

Meanwhile, lawmaker Kim Jong-hoon asked the National Pension Service to unload its stake in Korea Kolmar. “The NPS should consider unloading its shares of Kolmar Korea and Kolmar Korea Holdings as Yoon’s reckless behavior resulted in damages to the national pension fund and many individual investors,” Kim said.

As of end-June, the NPS holds 11.22 percent stake in Korea Kolmar and 6.22 percent in Korea Kolmar Holdings.

The unexpected crisis came as the company best known for original development manufacturing has been expanding rapidly on the back of the popularity of K-beauty. It has also set a goal to become a leading pharmaceutical company by 2020 after acquiring CJ Healthcare for about 1.3 trillion won last year.

After Yoon’s resignation, there are market speculations that his son Yoon Sang-hyun, CEO of Kolmar Korea, may head the company. Yoon and his family hold almost 50 percent in the holding company which in turn is the biggest shareholder of Kolmar Korea.

By Park Ga-young (gypark@heraldcorp.com)

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