NCSOFT Q1 net profit down 50% due to sales

SEOUL South Korean game developer NCSOFT Corp. said yesterday its first-quarter net profit halved from a year ago due to sluggish sales of its popular mobile titles.

The company posted a net profit of 57.1 billion won (US$41.7 million) for the January-march period, down 50 per cent from 114.2 billion won a year earlier, according to a regulatory filing.

Its operating profit plunged 68 per cent on-year to 25.7 billion won from 81.6 billion won, and revenue fell 16.9 per cent to 397.9 billion won.

The earnings exceeded market expectations. The average estimate of net profit by analysts stood at 28.2 billion won, according to a survey by Yonhap Infomax, the financial data firm of Yonhap News Agency.

NCSOFT said the weak bottom line for the first quarter was led by a decline in mobile sales, which accounted for 63 per cent of the company's quarterly sales.

Sales of mobile games tumbled 24.6 per cent on-year to 249.4 billion won due to sluggish demand for its signature "Lineage" series.

In particular, NCSOFT'S major game title "Lineage W" (2021) posted 82.8 billion won in sales, down 58 per cent from a year earlier.

But PC online games saw their sales remain nearly unchanged at 91.5 billion won.

By market, sales in South Korea reached 259.4 billion won, accounting for 65.2 per cent of the company's overall sales, followed by Asia with 69.2 billion won, and North America and Europe combined with 36.6 billion won.

In a conference call, NCSOFT'S COCEO Park Byung-moo confirmed the company's restructuring plan aimed at overcoming its management crisis.

Under the plan, the gaming giant will work to complete a layoff by the end of this month and push for a spinoff of some of its organisations, he said.

It came after the company suffered an earnings shock last year amid lower-than-expected popularity of its new game titles. Its annual operating profit plunged to 137.3 billion won, which is less than one-fifth of the corresponding figure for 2020.

In December, NCSOFT appointed Park, who is a management specialist, to tackle the poor performance, in its first-ever shift to a dual leadership system. The company has been solely led by its founder Kim Taek-jin since its establishment in 1997.

Park also unveiled the company's strategy to expand its foothold in the global market, saying it will release global versions of action games "Battle Crush" and "Project BSS," as well as its latest massively multiplayer online role-playing game "Throne and Liberty" later this year.

He added the company is also working to release massively multiplayer online game "Blade and Soul 2" in China this year in cooperation with local game publisher Tencent.

"We plan to make the detailed announcement in July or August, but we are also working to develop console games with our original intellectual properties with a global console platform company," Park said, noting the company will foster further growth in the North America market.

The company is also trying to break into the Southeast Asian market by establishing a joint venture with a number of companies there, Park said, noting more details of the plan will be shared in the future.

Despite poor first-quarter earnings, shares in NCSOFT had shot up 11.65 per cent to 206,000 won as of 10:30 a.m. on the main Seoul bourse, outperforming the broader Korea Composite Stock Price Index's 0.71 per cent increase. The earnings results were released after the stock markets opened.

The jump in NCSOFT'S shares is attributable to the company's announcement it will buy back its shares worth some 98.1 billion won by August 9 as part of efforts to increase its stockholders' value.

The company said it plans to use the funds for mergers and acquisitions in the future.