[Edaily Reporter KYUNG GYEYOUNG ] With the K-Beauty industry setting “all-time high” export records, particularly in the U.S. and Europe, the prevailing view is that third-quarter earnings will be robust. However, with the won-dollar exchange rate falling (the won strengthening), earnings forecasts are trending slightly downward.

According to import-export trade statistics from the Korea Customs Service released on the 19th, exports of skincare and color cosmetics—including suncare products—totaled $3.37874 billion in the third quarter (July–September), a 38.2% increase compared to the same period last year. Following growth rates of 18.5% in the first quarter and 30.8% in the second quarter, the pace of export growth is gradually accelerating. In particular, exports in September exceeded $1.2 billion for the first time ever. This is due to market diversification beyond the U.S. to include Europe and the Middle East.

Unit: $100 million

Although export performance is breaking records, the average consensus forecast for the third-quarter earnings of major K-Beauty companies is trending slightly downward. This is because the falling won-dollar exchange rate has increased the likelihood that companies with a high proportion of exports will see their won-denominated earnings fall short of expectations. The won-dollar exchange rate, which had soared to an average of 1,501.93 won in the second quarter, has dropped to an average of 1,423.28 won in the third quarter.

According to data compiled by financial information provider FnGuide Inc. ( APR(278470)), the consensus estimate for operating profit, which stood at 196 billion won a month ago, has recently been revised downward by nearly 10 billion won to 181.9 billion won. APR, an emerging Shinhung in K-Beauty, saw overseas sales account for 92% of its total revenue in the second quarter, demonstrating an overwhelming reliance on international markets. SILICON 2 Co.,Ltd.(257720), a K-Beauty distributor, also saw its operating profit consensus drop to 84.8 billion won from 87.8 billion won a month ago. As of the second quarter, SILICON 2 Co.,Ltd.’s revenue from Europe and North America accounted for 43.1% and 21.7%, respectively.

AMOREPACIFIC CORPORATION(090430)The operating profit consensus for [Company Name] also fell slightly to 116.7 billion won from the 118.3 billion won consensus a month ago. For [ LG H&H(051900) ], the consensus also dropped from 111.0 billion won to 103.4 billion won over the same period.

Lee Gyo-seok, an analyst at ShinyoungSecurities, stated, “The strong won will have a significant negative impact on beauty brands and distribution vendors, whose business models primarily involve purchasing finished products in won and generating foreign currency revenue,” adding, “If the won-dollar exchange rate falls by 5%, companies like APR will see their operating profit margins drop by around 1 percentage point.”

However, the industry is focusing more on the upward trend in exports. From the 1st to the 10th of this month, cosmetics exports totaled $294 million, marking a 42% increase on a daily average basis compared to the same period last year.

Park Jong-dae, an analyst at Hana Securities, noted, “Major K-Beauty companies are securing a steady stream of offline retail placements with major retailers, particularly in the U.S. and Europe, which will drive earnings growth,” and assessed that “excluding the impact of exchange rates in the third quarter, earnings are better than expected.”