July 26, 2017 / 8:26 AM / 2 years ago

S.Korea's AmorePacific profit plunges as China row hits duty-free sales

SEOUL, July 26 (Reuters) - AmorePacific Corp, South Korea’s biggest cosmetic company, reported a 58 percent slump in operating profit in the second quarter on Wednesday, as the once investor-darling bore the brunt of diplomatic tensions with China that dampened demand from Chinese tourists.

Chinese visitors, the largest population of the total tourists to South Korea, fell 66 percent in June from a year earlier, resulting in a significant plunge in the number of customers to domestic duty-free shops.

Since mid-March, Beijing has banned travel agencies from selling trips to South Korea following Seoul’s decision to deploy a U.S. missile system to counter North Korean threats, despite China’s objections.

“Cosmetic giants such as AmorePacific tend to rely on profits produced from duty-free stores,” said Cho Yong-sun, an analyst at HMC Investment Securities.

AmorePacific reported an operating profit of 102 billion won ($91.13 million) in the second quarter of this year, compared with 241 billion won a year earlier and analysts’ consensus of 138 billion won.

LG Household & Healthcare Ltd, AmorePacific’s rival firm, on Monday reported a 7.3 percent rise in first-half operating profit at 492 billion won. Its reliance on duty-free shops is relatively small compared to AmorePacific’s.

LG Household & Healthcare also has diversified businesses, including beverage and household goods, helping it offset slowing sales in the cosmetics goods, Cho said. ($1 = 1,119.3400 won) (Reporting by Haejin Choi; Editing by Hyunjoo Jin and Gopakumar Warrier)

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