Korean Inc.’s Q2 earnings outlook mixed with grim prospect for chips, displays

Samsung Electronics Co. in Seoul [Photo by Yonhap]

The second-quarter earnings outlook for major companies in South Korea remains mixed, with a continued dim outlook for chips, display, and petrochemical sectors amid the prolonged weak economy and demand.

According to data from Yonhap Infomax Co., a financial news and data-providing company in Korea, on Monday, the market consensus for Samsung Electronics Co.’s second-quarter operating profit provided by brokerage houses within one month stands at 273 billion won ($206.3 million).

The figure is down 98.1 percent from 14.1 trillion won during the second quarter of last year and 57.4 percent from 640.2 billion won in the first quarter when the tech giant delivered an earnings shock.

The chips division of Samsung Electronics, which logged 4.58 trillion won in operating loss for the first quarter, is expected to continue its weak performance.

The smartphones division at Samsung Electronics is also projected to see slow earnings in the second quarter.

SK hynix Inc. is also projected to log an operating loss of 3.2 trillion won in the second quarter, similar to 3.4 trillion won in the first quarter.

The chipmaker is more vulnerable to the down cycle of the chip industry as more than 90 percent of its total earnings rely on memory chip sales.

Market insiders expected the earnings of the country’s chipmakers to bounce back in the second half of this year on the back of the effects of production cuts and demand recovery.

LG Display Co. that has been hit by the slump in the display industry is projected to post an operating loss of 897.3 billion won for the second quarter as issues of sluggish demand and inventory remain unresolved.

S-Oil Corp. logo [Courtesy of S-Oil]

Korean oil refineries that enjoyed a rare earnings boom last year are struggling this year due to falling oil prices and refinery margins.

S-Oil Corp. raised 519.8 billion won in first-quarter operating profit, down 61.3 percent from a year ago. The oil refinery is expected to post 400 billion won in operating profit for the second quarter, a plunge of 76.8 percent from the same period a year ago.

The petrochemical industry has also continued sluggish performance in the first quarter.

Kumho Petrochemical Co.’s first-quarter operating profit plunged 71 percent from the same period last year to 130.2 billion won. The company’s second-quarter forecast is down at 123.1 billion won.

A relatively positive outlook is expected for LG Chem Ltd and Lotte Chemical Corp. that have expanded new businesses beyond the petrochemical sector.

LG Chem posted a first-quarter operating profit of 791 billion won, down 22.8 percent from last year, on the robust sales of its battery business.

For the second quarter, the company is forecast to post an operating profit of 884.3 billion won, up 11.8 percent from the first quarter.

Lotte Chemical, which is scheduled to report its first-quarter earnings on Thursday, is expected to end its streak of four straight quarterly losses and swing to the black as early as the second quarter, according to market sources,

Automakers and battery manufactures are projected to continue to enjoy a rosy second-quarter outlook.

Hyundai Motor Co. is projected to post 3.61 trillion won in operating profit for the second quarter, which exceeds its first-quarter performance.

Some brokerage firms, including Daol Investment & Securities Co., expected the automaker to report more than 4 trillion won in operating profit.

Its smaller sibling Kia Corp. is projected to post 2.96 trillion won in its second-quarter operating profit to surpass its record first-quarter earnings.

Korean battery maker LG Energy Solution Ltd. (LGES) is projected to post 722 billion won in second-quarter operating profit, up 269.1 percent from 195.6 billion won in the second quarter last year.