Korean Cinemas Profitable at Home But See Overseas Loss

By Patrick von Sychowski | August 9, 2022 4:52 am PDT
CGV Cinemas, South Korea

The latest figures from Korea’s largest cinema operators highlights an uneven recovery across Asia but a slow return to profitability in their home market. While CJ CGV saw a year-on-year decrease for the second quarter of 2022, Lotte’s cinema operation returned to profit for the first time since the start of the Covid-19 pandemic. Korean cinemas stayed open for long, but were since then one of the last to have all restrictions lifted. They have now had to put up ticket prices, while facing staff shortages, as a result of the pandemic.

Korea’s largest cinema operator CJ CGV had an operating loss of KRW 16.2 billion (USD $12 million) on a consolidated basis in Q2, marking a significant year-on-year compared to Q2 2021, when its profit was KRW 57.3 billion (USD $44 million). Sales were KRW 318.5 billion (USD $240 million). CJ CGV did manage to eek out a profit in its domestic market, with KRW 800 million (USD $610,000), based on sales of KRW 119 billion (USD $91 million), an increase of 157.8% on the same quarter in 2021. This is the first time that CJ CGV has show a profit in Korea since the outbreak of Covid-19.

Rival Lotte Culturework, the cinema operation of the Korea retail giant Lotte, also returned to profit for the first time since Q1 2020. Cinema sales were KRW 121.4 billion (USD $93 million) with an operating profit of KRW 10.5 billion (USD $8 million) in Q2 of 2022. Sales increased by 180.6% compared to the Q2 of 2021. Lotte Shopping also saw a profit, despite falling demand for food services.

CJ CGV figures were dragged down by closures and a slow recovery in the rest of Asia. Notably in China sales dropped 64.3% to KRW 23.4 billion (USD $18 million) as many cinemas closed and film releases were pushed back as a result of lockdowns in many major cities. CJ CGV’s operating loss in China was tentatively estimated at KRW 28.3 billion (USD $22 million). CJ CGV’s Turkish operation went from profit in Q1 to loss of KRW 2.3 billion (USD $1.8 million) in Q2. CJ CGV’s 4DPlex subsidiary, responsible for 4DX and SCreenX, was profitable with KRW 28.7 billion (USD $2.2 million) in sales and KRW 5.1 billion (USD $3.9 million) in operating profit.

We are recovering from the bad news of COVID-19, and we have set a turning point for earnings recovery thanks to the success of Hollywood and local content… We expect that we will be able to take one step closer to normalizing business in the second half of the year by securing financial soundness by securing preemptive funds through capital increase and issuance of permanent convertible bonds.

Heo Min-hoe, CEO of CJ CGV

Korean cinemas have done well in Q2 thanks to the strong performance of Hollywood titles such as “Top Gun Maverick” and domestic hits such as “Crime city 2”. The lifting of restrictions on the F&B consumption in cinemas in April also helped boost attendance and earnings. The outlook is positive, with much anticipated domestic films “Hansan: The Appearance of the Dragon”, “Emergency Declaration” and “The Hunt”, as well as Hollywood titles such as “Bullet Train”. However, Korean cinemas continue to suffer from poor service due to a lack of staff. A large number of cinema employees were laid off during the pandemic and have since chosen not to return to work for the big multiplexes.

Patrick von Sychowski
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