[Edaily Reporter KIM SAE-MI ] Hugel, Inc.(145020)reported that its operating profit for the third quarter of this year plummeted 62% year-over-year amid the restructuring of its U.S. botulinum toxin distribution system. The company projected that U.S. sales would return to normal starting in the fourth quarter of this year.

Hugel, Inc. announced on the 4th that it recorded consolidated revenue of 97.5 billion won and operating profit of 18.1 billion won in the third quarter of this year. These figures represent decreases of 7.9% and 61.8%, respectively, compared to the same period last year. Net income for the same period plummeted 87.6% to 4.7 billion won.

The third-quarter operating margin stood at 18.6%, down 26.2 percentage points (p) from 44.8% in the same period last year. Profitability also deteriorated significantly compared to the previous quarter’s operating margin of 40.6%.

The primary cause of this decline in performance was the restructuring of the U.S. distribution system. Hugel, Inc. shifted the distribution model for its U.S. botulinum toxin product “Retivo” from a system centered on its existing partner, Benev, to a Contract Sales Organization (CSO) model. During this transition, revenue temporarily decreased as Hugel, Inc. repurchased inventory held by Benev.

A Hugel, Inc. official stated, “Sales temporarily declined as we repurchased the existing inventory held by Benev during the transition to the U.S. CSO model,” adding, “The impact of the inventory repurchase was fully reflected in the third quarter, and we expect U.S. sales to return to normal in the fourth quarter.”

Hugel, Inc. is currently operating under a CSO model in the U.S. and plans to transition to a direct sales model next year. The company maintains that this inventory repurchase was a preemptive measure to secure control over distribution for its U.S. business.

A Hugel, Inc. official noted, “The repurchase of Benev’s inventory was a preemptive move taken from a long-term perspective,” adding, “We do not expect a decline in earnings similar to this one when we transition to direct sales next year.”

Despite the repercussions of the U.S. business restructuring, the company continued to grow in the domestic market and major overseas markets. Combined third-quarter domestic sales of botulinum toxin, fillers, and skin boosters reached 27.4 billion won, a 54% increase compared to the same period last year. Combined sales of these products in Europe and other regions also rose by 18% to 17.8 billion won.

In China, the company maintained its second-place position with a 22% local market share, while in Brazil, it achieved its highest-ever quarterly performance on the first anniversary of its re-entry into the market.

By product category, third-quarter sales of botulinum toxin totaled 47.2 billion won, a 21% decrease compared to the same period last year. Sales of fillers and skin boosters rose 2% to 30.9 billion won, while the cosmetics and other segments grew by more than 25% to 19.4 billion won.

Despite the decline in third-quarter performance, cumulative sales for the year continued to grow. The company emphasized that cumulative sales for the first three quarters totaled 352.1 billion won, a 15.1% increase compared to the same period last year. However, cumulative operating profit decreased by 14.9% to 121.7 billion won, and cumulative net profit also fell by 15.9% to 90.1 billion won.

CARRY Strom, Global CEO of Hugel, Inc., stated, “Building on our leading position in Korea, Hugel, Inc. continues to expand its foundation for global growth.” She added, “In particular, as we have made significant progress in establishing a direct-to-consumer sales model in the U.S., our key market, we will solidify the company’s medium- to long-term profitability based on Retivo’s competitiveness.”

Jang Doo-hyun, CEO of Hugel, Inc. in Korea, remarked, “We have once again confirmed our solid growth foundation as both our toxin and filler products achieved strong results in the domestic market.” He pledged, “As we continue to grow in major overseas markets such as Europe, China, and Brazil, we will strive to diversify our product portfolio while strengthening the competitiveness of our core businesses.”