Earnings outlook in Q3 for Korean Inc. sharply revised down on commodity price surge

[Graphics by Song Ji-yoon]

Local brokerages have shaved third-quarter earning outlook from a month ago for Korean listed companies amid higher production cost from surge in commodity prices.

According to local market tracker FnGuide on Wednesday, the combined operating income projection put forward by local brokerages for 168 major listed firms for the third quarter ended September came to 58.75 trillion won ($50.1 billion). The figure is up 50.1 percent from 39.14 trillion won a year earlier but down 0.1 percent from the forecast of 58.82 trillion won made a month ago.

Their net profit projection has been more sharply revised down. The companies are predicted to have posted a combined net profit of 29.65 trillion won in the June-September period, off 34 percent from their last month¡¯s estimate of 44.89 trillion won.

Sales forecast, meanwhile, has been revised up 0.1 percent to 508.18 trillion won.

The downgrading in earnings forecast comes amid spike in commodity prices higher that would have weighed over the bottom line.

Companies are offering conservative earnings guidance after Samsung Electronics Co. and other major companies reported mixed preliminary results for the third quarter.

[Photo by Lee Seung-hwan]

Kospi bellwether Samsung Electronics in its earnings guidance estimated its operating income at 15.8 trillion won for the third quarter, the best since the third quarter of 2018 but slightly falling short of a market consensus of 16 trillion won. Sales were estimated to have reached 73 trillion won, marking the first time to top 70 trillion won.

The country¡¯s household electronics name LG Electronics Inc. estimated its third-quarter operating income halved from a year earlier on increased cost-sharing in recall for GM Bolt powered by battery packs made by its affiliate LG Energy Solution.

Top steelmaker Posco surprised the market, estimating its third-quarter operating profit to have reached 3.11 trillion won thanks to explosive steel demand.

Hyundai Motor, SK Innovation, S-Oil, Hotel Shilla, Korean Air Lines, Kangwon Land, and Hanmi Pharmaceutical, which posted operating losses in the third quarter last year, are forecast to return to black figures.

However, the operating income and net profit estimates for Hyundai Motor have been lowered 6.5 percent and 12.2 percent, respectively, to 1.68 trillion won and 1.4 trillion won.

Brokerages have also cut operating income projections for SK Innovation and Hotel Shilla by 3.9 percent and 4.5 percent, respectively.

[¨Ï Maeil Business Newspaper & mk.co.kr, All rights reserved]