1. Solux Advanced Materials Q2 Earnings: The Headlines
Solux Advanced Materials reported KRW 143.9 billion in revenue, KRW -15 billion in operating profit, and KRW -41 billion in net income for Q2 2025. While operating profit slightly beat market expectations of KRW -15.8 billion, net income fell significantly short of the estimated KRW -12.8 billion.
2. Deciphering the Net Income Drop
The decline in net income is primarily attributed to weakness in the battery foil business. Rising raw material prices, exchange rate fluctuations, and operational challenges at the Hungary plant have all contributed to the downturn. While the Canada plant construction promises long-term growth, it has yet to contribute to short-term profitability. The OLED and advanced materials segments also faced headwinds from intensifying competition in the Chinese market and uncertainties surrounding Solux iTech’s performance.
3. External Factors: A Perfect Storm
- Rising Raw Material Prices: Increasing international crude oil prices have elevated raw material transportation costs, impacting profitability.
- Exchange Rate Volatility: A strengthening KRW against the USD and EUR has negatively affected the export-oriented Solux Advanced Materials.
- Interest Rate Hikes: Rising interest rates in the US and Europe have led to increased interest expenses, further impacting profitability.
4. Investment Strategy: Proceed with Caution
Downward pressure on the stock price is expected in the short term. For long-term investors, careful monitoring of external factors like raw material prices, exchange rates, and interest rates is crucial. Furthermore, assessing Solux iTech’s growth potential and the company’s risk management strategies, particularly hedging against raw material and exchange rate fluctuations, is essential.