Hannong Chemicals' (KRX:011500) Sluggish Earnings Might Be Just The Beginning Of Its Problems

A lackluster earnings announcement from Hannong Chemicals Inc. (KRX:011500) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

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How Do Unusual Items Influence Profit?

Importantly, our data indicates that Hannong Chemicals' profit received a boost of ₩3.1b in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. Hannong Chemicals had a rather significant contribution from unusual items relative to its profit to March 2025. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Hannong Chemicals.

Our Take On Hannong Chemicals' Profit Performance

As we discussed above, we think the significant positive unusual item makes Hannong Chemicals' earnings a poor guide to its underlying profitability. For this reason, we think that Hannong Chemicals' statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. Sadly, its EPS was down over the last twelve months. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. To that end, you should learn about the 3 warning signs we've spotted with Hannong Chemicals (including 1 which is a bit concerning).

Today we've zoomed in on a single data point to better understand the nature of Hannong Chemicals' profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.