Analysts turn grim on Korean Inc.’s Q4 earnings

Analysts turn grim on Korean Inc.’s Q4 earnings. [Sources : MK DB, Gettyimagesbank]

South Korean analysts have become more pessimistic about fourth-quarter earnings of Korean Inc. amid sluggish industry environment led by a gloomy economy.

According to Seoul-based financial data tracker FnGuide on Thursday, 258 listed companies that have not yet announced their fourth-quarter earnings are projected to have raised 27.8 trillion won ($21.8 billion) in operating income.

Market insiders, however, noted that the actual income could be weaker than the projection as analysts are mixed in terms of the outlook, with the lowest projection standing at just over 12 trillion won.

The average operating loss consensus of chip giant SK hynix Inc. stood at 951.9 billion won for the October-December period. Kiwoom Securities Co. was the most pessimistic - it expected the company to log 1.9 trillion won in losses - while Samsung Securities Co. 626 billion won and Shinhan Securities Co. 614 billion won.

The sluggish outlook comes after Samsung Electronics Co. in its guidance last week reported weaker-than-expected earnings for the fourth quarter.

“DRAM and NAND flash shipment have declined 7 percent and 2 percent each in the fourth quarter from the previous quarter,” Park Yoo-ak, a researcher at Kiwoom Securities, said in a report Tuesday. “Clients are adjusting inventory at stronger level than expected.”

Shares of SK hynix, however, rose 15.7 percent this year, suggesting recovery in memory chip industry. [Source : SK hynix]

Shares of SK hynix, however, rose 15.7 percent this year, suggesting recovery in memory chip industry.

Korean refineries also face weak operating income outlook due to a decline in oil prices that worsen profitability.

Hana Securities Co. projected SK innovation Co. to report 413.2 billion won in operating loss in the fourth quarter, falling short of a consensus of 619.5 billion won in operating profit. One of the reports also expected S-Oil Corp. to suffer 177.8 billion won in operating loss versus a 232.1 billion won operating profit consensus.

Operating losses would be inevitable as refineries face falling exchange rate, lower refining margin, and inventory-related losses, according to Yoon Jae-sung, a researcher at Hana Securities.

Shares of SK innovation and S-Oil fell 17 percent and 14 percent from November.

Experts, in the meantime, remain mixed in some industries like steel.

Eugene Investment & Securities Co. projected POSCO Holdings Inc.‘s operating income in the fourth quarter at 777.7 billion won on Monday. HI Investment & Securities Co. however on the next day projected 97.4 billion won. Their projections for target stock price also differ - 440,000 won and 380,000 won, respectively.

The different outlook derives from different views about profitability according to changes in steel prices.