[E-Daily Reporter Kim Seung-kwon ] Osstem Implant’s earnings recovery is becoming evident in profits before it does in sales. The industry is highly optimistic about the possibility of a rebound in Osstem Implant’s performance this year.

In fact, while revenue rose 5.2% in the first half of this year, operating profit more than doubled. This is the result of rising product sales combined with a decrease in cost of goods sold. With domestic sales expansion and improvements in various overseas markets offsetting China’s sluggish recovery, there is even talk of the company potentially returning to an annual operating profit of 170 billion won. Pharm E-Daily has estimated Osstem Implant’s performance for this year by synthesizing the company’s projections and analyst estimates.

As sales rose 5%, costs fell 4%… Business improvements drove profit recovery

According to an electronic disclosure by the Financial Supervisory Service on the 21st, Osstem Implant’s consolidated revenue for the first half of this year was 691.1 billion won, and operating profit was 87.9 billion won. These figures represent increases of 5.2% and 109.5%, respectively, compared to the same period last year. The operating profit margin rose from 6.4% to 12.7%. In just half a year, the company surpassed last year’s full-year operating profit (80.1 billion won). Last year’s operating profit had fallen to about half the level recorded in 2024 (161.8 billion won).

What stands out is that revenue and cost of goods sold moved in opposite directions. Cost of goods sold for the first half decreased by 4.2%, from 269.2 billion won to 257.9 billion won. Gross profit rose by 11.8% to 433.2 billion won. This rebound cannot be explained solely by revenue growth.

An Osstem Implant official stated, “The recovery in first-half operating performance appears to have been driven primarily by business factors such as increased product sales,” adding, “While revenue rose 5.2% year-over-year, cost of goods sold fell 4.2%, resulting in a 109.5% increase in operating profit.” The official further explained, “The strategic deployment of necessary personnel to the right places can also be seen as a contributing factor to this improvement.”

This suggests that the rebound cannot be attributed solely to personnel restructuring or cost cuts. Although the number of employees decreased from 3,043 in 2024 to 2,981 last year, there is no basis to attribute most of the profit increase to savings in labor costs. To identify the specific factors behind the improvement, one must examine both the sales mix by product and changes in selling, general, and administrative expenses.

Reorganization of the management system is also underway. The consortium of Unison Capital Korea (UCK) and MBK Partners finalized the acquisition of management control in August 2023. When earnings began to decline, the company formed a task force (TF) to improve performance in July of last year. The company is adjusting businesses with low synergy by evaluating profitability by country and product, and is changing its sales staff evaluation system to incorporate financial and operational metrics. However, the extent to which these efforts contributed to first-half profits has not been disclosed.

The annual operating profit of 170 billion won is the company’s own estimate. This figure is reached by adding the first-half profit of 87.9 billion won to the projected second-half profit of 82.1 billion won. It is achievable even if second-half profits are 6.6% lower than those of the first half. Assuming annual revenue of 1.4 trillion won, second-half revenue would need to be 708.9 billion won, with an operating profit margin of approximately 11.6%.

An Osstem Implant official stated, “Annual revenue for 2025 is 1.3327 trillion won, and revenue for the first half of 2026 was 691.1 billion won, a 5.2% increase compared to the same period last year,” adding, “We expect better results than last year, but since the fourth-quarter results are still pending, it is difficult to say for certain.”

Domestic Growth Reduces Reliance on China… VBP and Overseas Diversification Are the Next Challenges

Some argue that the decline in dependence on China should be viewed in context. This is because a decrease in China’s share does not necessarily mean that a specific overseas region has experienced rapid growth. The company explained that the increase in domestic sales has relatively reduced China’s share.

An Osstem Implant official stated, “As domestic sales have increased, our dependence on China has relatively decreased,” adding, “While China has not shown a significant rebound due to the impact of policies such as VBP, performance is improving in various other countries.”

The slump in China is also evident among competitors. Last year, sales at Osstem’s Chinese subsidiary fell 22.1% to 178.9 billion won. Dentium’s sales in China also declined by 32% to 132.6 billion won. Although the accounting standards differ—one based on subsidiary sales and the other on regional sales—this demonstrates that the slump is not limited to a single company.

In the first round of the 2023 VBP, domestic companies secured top-tier contract volumes rather than lowering prices. However, the increase in sales volume failed to offset the decline in unit prices, and demand fell short of expectations due to the economic slowdown in China. In essence, securing volume and increasing sales were two separate matters.

The second VBP round will be conducted as an open bidding process that evaluates both price and quality. This presents an opportunity for domestic companies that emphasize value for money. Shin Min-soo, an analyst at Kiwoom Securities, stated in a recent interview, “Uncertainty in the Chinese market is expected to be resolved through the second VBP round, accompanied by a smaller price adjustment compared to the first round.”

There have been signs of improvement in non-Chinese markets. In June, the company reported its first-quarter results, noting that a recovery in domestic sales and improvements at its subsidiaries in Japan, Europe, and Brazil contributed to the increase in profits. During the same period, sales in the U.S. and China remained at the previous year’s levels. Further verification is needed to determine whether this trend continued with the same intensity throughout the first half of the year.

An Osstem Implant official emphasized, “Under our guiding principle of ‘growing through education’ and given our direct presence in more than 30 countries worldwide, we expect this growth momentum to continue in the future.”

Base Effects and Perpetual Bonds… “Quality of Recovery” Remains a Challenge

However, some observers note that it remains to be seen whether the rebound will continue. Given that operating profit was cut in half last year, this year’s growth rate is bound to appear large due to the base effect. Cost savings achieved through workforce efficiency measures are a one-time gain. If reinvestment for growth increases again, profit margins could decline.

Furthermore, China has not yet shaken off the impact of its Volume-Based Procurement (VBP) policy. For annual profit recovery to materialize, cost improvements and overseas growth must be sustained in the second half of the year. While the company expects better performance than last year, it maintains that it is difficult to make definitive annual forecasts with the fourth quarter still ahead.

Financial burdens also remain. At a board meeting on the 20th, the company approved the issuance of 120 billion won in hybrid capital securities (perpetual bonds). The funds will be used to repay loans taken out by its U.S. and Brazilian subsidiaries. The coupon rate is 6.8% per annum, amounting to 8.16 billion won in annual interest alone. In three years, the interest rate will rise to 9.3%, and it will increase by an additional 1 percentage point each year thereafter. The company expects its debt-to-equity ratio to decline from the 240% range to the 190% range.

An Osteom Implant official stated, “This issuance of hybrid capital securities goes beyond mere fundraising; it is intended to improve the debt structure of our overseas subsidiaries, thereby enhancing our creditworthiness and reducing financial costs and exchange rate risk,” adding, “Based on a stable financial foundation, we will continue to support the sustained growth of our global business and enhance our corporate value.”