Earnings at some Korean listed companies expected to improve from Q2

[Image source: Gettyimagesbank]

Earnings expectations for the second quarter and beyond are improving as first-quarter results were slightly better than what the market had forecast with the financial investment industry estimating that the chips business will remain sluggish until the second quarter, while the shipbuilding sector improves.

According to financial data tracker FnGuide Inc. on Wednesday, second-quarter sales of 152 domestic listed companies with earnings estimates released by three or more brokerages are projected to edge down to 489.13 trillion won ($366 billion) from 490.3 trillion won a year ago. Operating profit is expected to decline 51.9 percent to 19.19 trillion won from 39.85 trillion won a year earlier.

Operating profit of listed companies in the first quarter halved from a year ago, the first time profit dropped more than 50 percent since the global financial crisis in the first quarter of 2009.

Stock market experts predict that the listed companies will continue to see sluggish earnings until the second quarter amid the global economic slump. “Companies face a double whammy of high interest rates and prices that lead to high production costs,” said Kim Hyung-ryeol, head of the research center at Kyobo Securities Co. “Annual earnings growth is highly likely to be negative as the trend will continue into the second quarter.”

However, second-quarter operating profit forecasts have been revised up by 3.1 percent from the previous estimate of 18.6 trillion won a month earlier, on better-than-expected performance in the first quarter. Profit in the first three months of 119 out of 232 listed companies were higher than expected and 113 lower than expected, according to FnGuide.

LX Hausys Co., KEPCO Engineering & Construction Co., Hanwha Corp., Hanwha AeroSpace Co. and YG Entertainment Inc. reported operating profits that were double the estimates in the first quarter.

Brokerages are edging up their quarterly forecasts as the first-quarter earnings outperformed estimates. Operating profit forecast has been raised for a third week in a row, which is the first since November last year. “It means we have confirmed through the filings of first-quarter earnings that the forecast had been excessively low,” said Cho Chang-min, an analysts at Yuanta Securities Co.

Samsung Electronics Co. headquarters in Seoul [Photo by Lee Chung-woo]

The outlook for the second-quarter earnings, however, differ by sector. Semiconductor earnings are expected to worsen in the second quarter. Electronics giant Samsung Electronics Co.’s operating profit for the second quarter is expected to fall 98 percent on-year to 266.5 billion won, a decline of more than 50 percent from 640.2 billion won in the first quarter. Loss at SK hynix Inc. is projected to reach 3.29 trillion won in the second quarter from 3.4 trillion won in the previous quarter and 4.19 trillion won profit a year ago.

Oil and gas and metals and minerals sectors, which posted higher profit last year on rising raw material prices, are also expected to remain sluggish. SK innovation Co. and S-Oil Corp. both posted operating profits of around 2 trillion won in the second quarter last year, but they are expected to drop more than 75 percent to a range of 400 billion won this year. Second-quarter operating profit at POSCO Holdings Inc., owner of Korea’s largest steel manufacturer, is also expected to decline 45 percent this year from 2 trillion won last year.

The shipbuilding sector, on the other hand, is expected to emerge strong from the long downturn. HD Hyundai Heavy Industries Co. and Samsung Heavy Industries Co., which posted operating losses in the second quarter last year, are expected to each report profit of around 80 billion won and 30 billion won ranges in the second quarter.

Hotel and leisure businesses and pharmaceuticals are also expected to perform well. Casino companies Paradise Co. and Grand Korea Leisure Co. are projected to swing to operating profit in the second quarter with the reopening of borders in China. Pharmaceutical companies will also benefit from the trend. Profit at Green Cross Corp. is expected to increase 56 percent on-year to 20.3 billion won and that at Hanmi Pharmaceutical Co. will likely climb 37 percent to 43.3 billion won.

The Korea Exchange, in the meantime, released first-quarter earnings statistical data for listed companies on Wednesday. Sales of 622 Kospi-listed companies were up 5.7 percent from the same period last year to 697.37 trillion, but their operating profit declined 52.8 percent to 25.17 trillion won. Net profit also fell 57.7 percent from a year ago to 18.84 trillion won.

Companies listed on secondary Kosdaq were less impacted. First-quarter sales of 1,115 Kosdaq-listed companies were up 7.5 percent to 67.64 trillion won from a year ago. But operating profit and net profit dropped 42.2 percent and 26.3 percent each to 2.49 trillion won and 2.5 trillion.