Q3 Revenue of 875.8 Billion Won and Operating Profit of 83.3 Billion Won… Korean Subsidiary Accounts for 82% of Profit Growth
Profitability Improves on High-Margin Product Orders… Domestic Factory Utilization Rate Reaches High 80s
The global popularity of K-Beauty is translating into strong financial performance for domestic cosmetics manufacturers. Cosmax, a global original development manufacturing (ODM) firm, recorded its highest-ever quarterly revenue in the third quarter of this year. The growth was spearheaded by its Korean subsidiary, as orders from K-Beauty brands expanding their sales networks in the U.S. and Europe flooded into domestic production facilities. Operating profit surged by nearly 95% compared to the same period last year.
Cosmax’s consolidated revenue for the third quarter reached 875.8 billion won, a 49.5% increase year-on-year. Operating profit rose 94.9% to 83.3 billion won. The company demonstrated profit growth nearly double the rate of its revenue increase, maintaining strong performance even during the third quarter, which is typically considered a seasonal off-season.
K-Beauty Sold Abroad, Profits Generated at Home
The Korean subsidiary sits at the heart of this performance improvement. In the third quarter, revenue from the Korean entity reached 616.1 billion won, a 61% increase year-on-year, accounting for approximately 70% of consolidated revenue. Operating profit rose 97% to 67.7 billion won, with the Korean subsidiary contributing roughly 82% of the total consolidated operating profit growth.
As an ODM firm, Cosmax researches, develops, and produces products for client brands rather than selling its own. Recently, as domestic indie brands have expanded from online sales to offline retail channels in the U.S. and Europe, the production volume outsourced to Cosmax has increased. The sales channels secured by these brands overseas have directly translated into new orders for domestic factories.
Alongside the increase in order volume, the product mix has also shifted. The proportion of higher-margin products, such as essences and mists, has expanded, raising the Korean subsidiary’s operating profit margin from 8.9% in the third quarter of last year to 11.0% this year. The effect of reduced fixed-cost burdens due to increased production also contributed to the bottom line.
While there is a base effect from last year—when costs were concentrated on product development and facility investments for new clients—the consolidated operating profit still grew by approximately 92% compared to the third quarter of 2024, marking a significant expansion in profit scale over the past two years.
U.S. Operations Remain Profitable; Pyeongtaek Factory Expansion Accelerates
Performance improvements also continued at overseas production bases. The U.S. subsidiary maintained an operating profit for the second consecutive quarter, driven by repeat orders from local indie brands and new skincare product contracts. In China, client orders for color cosmetics and basic skincare products also increased. The company is not only producing for overseas brands in Korea but is also expanding its client base through local production facilities.
In Korea, the company is expanding production facilities to meet rising demand. According to Kyobo Securities, the domestic factory utilization rate reached the high 80% range in the third quarter. The expansion of the Pyeongtaek Plant 1 is about halfway complete, with some equipment having begun operation at the end of the third quarter. Once the expansion is finalized in January next year, annual domestic production capacity is expected to reach approximately 1.1 billion units.
While increased capacity provides room for additional orders, it may also raise fixed-cost burdens such as initial depreciation expenses. Profitability will depend on how quickly the new facilities are utilized. Despite the significant increase in operating profit this quarter, a 34.9 billion won deficit in non-operating income prevented the strong operating performance from fully translating into net profit.
Kwon Woo-jung, an analyst at Kyobo Securities, noted, "Despite the Chuseok holiday and summer vacations, the Korean revenue recorded a surprising 19% increase compared to the previous quarter. Given the momentum in the second half of the year, which differs from the past, our perspective on the industry outlook must also change."
