Korea’s chipmakers expected to report poor first-quarter earnings

Samsung Electronics Co. DRAM [Photo provided by Samsung Electronics]

With earnings announcements for the first quarter coming just around the corner, investor sentiment may turn bearish as a string of earnings shocks are expected from Korea’s major listed companies, including Samsung Electronics Co.

According to market tracker FnGuide on Sunday, the operating profit at Korean listed companies in the January-March period is estimated to have fallen by as much as 40 percent. The market consensus for operating profit at Kospi companies in the first quarter of this year is 22.42 trillion won ($17 billion), down more than 53 percent from a year earlier.

The outlook for the first-quarter operating profit for the electricity and electronics sector, including the semiconductor industry, is expected to plunge to an estimated loss of 671.3 billion won from a year ago. Other sectors, including steel, metal and chemicals are expected to see first-quarter operating profit to halve.

Samsung Electronics is set to announce its provisional first-quarter results on April 7. According to FnGuide, the estimated quarterly revenue is 64.27 trillion won, down 17.37 percent from 77.78 trillion won a year ago. Operating profit is forecast to reach 759.7 billion won, down a whopping 94.62 percent from last year’s 14.12 trillion won.

“Samsung Electronics is expected to have experienced a significant operating loss in the semiconductor division in the first quarter and other business divisions are also expected to have performed poorly,” said Kim Un-ho, an analyst at IBK Investment & Securities. “The price drop in DRAM and NAND in the first quarter is significant, and with the inventory asset valuation loss, operating loss at its semiconductor business is likely to continue for some time.”

SK hynix Inc. is expected to report a first-quarter revenue of 4.85 trillion won, down 60.1 percent, and an operating loss of 3.72 trillion won.

The local semiconductor industry is experiencing the worst downturn due to inventory valuation losses and their inventory assets could shrink due to a production cut as early as in the second quarter, experts said.