Three out of 10 Korean firms disappoint with Q3 results, worse is yet to come

Three out of 10 South Korean listed companies disappointed the market with their third-quarter performance, with earnings missing more than 10 percent from consensus levels.

According to Seoul-based financial data tracker FnGuide on Tuesday, 71 or 58.7 percent of 121 listed companies reported worse-than-expected income results for the quarter ended September. Of the total, 43 or 35.5 percent saw their earnings miss the market consensus by more than 10 percent to be deemed “disappointments.”

Many of them are large-cap stocks including SK hynix that missed the market estimate by 23.3 percent, Posco Holdings by 39 percent, LG Electronics by 14 percent, Samsung SDS by 19.2 percent, and Samsung Electro-Mechanics by 11.1 percent.

Hanwha Systems disappointed the market the most with a margin of 98.2 percent due to decreased sales from the defense business despite heavy investment.

The earnings results of Hyundai Motor (45.5 percent lower than the consensus) and Kia (60.7 percent lower) were also disappointing even after considering the one-time costs for recall.

Analysts say the economic downturn from rapid rate hikes started affecting corporate profitability.

SK hynix’s operating margin halved to 15 percent from 30.3 percent a quarter ago, and Posco Holdings’ also to 4.2 percent from 9.1 percent. They are grappling with deteriorating profitability since they cannot raise the product prices due to subdued market demand.

The worse is yet to come.

Combined operating profit of 263 listed companies for this year is estimated at 206.98 trillion won, revised down 5.4 percent from the estimates a month ago, according to FnGuide.

Outlook for 2023 is even darker. Combined operating profit of 258 listed firms was projected to reach 209.13 trillion won next year, down 8.6 percent from the consensus compiled a month earlier. Analysts revised down the earnings estimates for more than half - 142 companies or 55 percent.

Poorer semiconductor business conditions led analysts to turn conservative on the broader chip industry. SK hynix’s operating profit next year is forecast to reach 373.9 billion won, losing a whopping 5 trillion won from the previous estimate a month ago. Consensus for Samsung Electronics was cut by 16.9 percent during the period.

By Kang Min-woo and Lee Ha-yeon