Korean Inc. expected to see operating profit increase by 10% in Q3

[Image source: Gettyimagesbank]

Listed companies in South Korea are expected to see their operating profit increase by about 10 percent in the third quarter from the same period a year ago, suggesting that their earnings will begin to rebound from the second half of this year.

According to sources from the financial investment industry on Monday, listed companies will begin to announce their second-quarter earnings, starting with the preliminary results announced by the country’s tech giant Samsung Electronics Co. on Friday.

Expectations for the second-quarter results are low, with some predicting that Samsung Electronics’ operating profit will be in the 200 billion won ($153.53 million) range.

Shares of Samsung Electronics, however, closed 1.11 percent higher at 73,000 won on Monday to approach a 52-week high. The gain suggests that the market has already reflected the expectations that major listed companies’ earnings will rebound in the third quarter after bottoming out in the second quarter.

According to financial information provider FnGuide Inc., second-quarter sales of 175 domestic listed companies with earnings projections by three or more securities firms are projected to reach 504.64 trillion won, slightly down from 508.54 trillion won a year earlier.

Operating profit is also projected to fall by 54.5 percent to 19.99 trillion won from 43.94 trillion won during the same period. The weak performance was anticipated in the market following the first quarter.

Market attention is focused on the third-quarter performance.

The third-quarter sales of 172 domestic listed companies are expected to reach 527.75 trillion won, up from 525.3 trillion won a year ago.

Operating profit is projected to reach 31.61 trillion won, up 10.6 percent from 28.57 trillion won a year ago.

However, it should be noted that corporate earnings started to decline in the third quarter of last year.

According to the Korea Exchange, the combined operating profit of 601 Kospi-listed companies reached 39.37 trillion won in the third quarter of last year, down 25.9 percent from 53.12 trillion won a year earlier. It represented a 30.4 percent decline from the previous quarter.

[Courtesy of KEPCO]

Some companies are expected to swing to a profit in the third quarter, including state utility Korea Electric Power Corp. (KEPCO). The firm is projected to reap an operating profit of 1.68 trillion won in the third quarter.

SK ie technology Co. and Hanwha Ocean Co. are also expected to swing back to profit.

By industry, shipbuilders, automakers, and electric utilities are expected to improve performance.

The shipbuilding industry has gradually improved its performance since the second quarter. Samsung Heavy Industries Co. is expected to achieve an operating profit of 48.4 billion won in the third quarter, and HD Hyundai Heavy Industries Co. is expected to post a 605 percent year-on-year increase to 110 billion won.

Hyundai Mipo Dockyard Co. is expected to see its operating profit increase by 95 percent to 27.4 billion won.

The automobile industry is also projected to continue its strong performance, driven by increased exports to the U.S.

The country’s largest automaker Hyundai Motor Co. is expected to raise 2.88 trillion won in third-quarter operating profit, up 86 percent from a year ago, while its smaller sibling Kia Corp. 2.4 trillion won, down 212 percent.

The semiconductor and related equipment sectors are expected to rebound compared to the second quarter but they will still show a significant gap with the performance in the third quarter of last year.

Samsung Electronics’ operating profit in the third quarter is projected to reach 3.72 trillion won, down 66 percent from the same period last year.

SK hynix Inc. is expected to continue to post a loss of around 2.27 trillion won in the third quarter. Semiconductor-related companies such as HANMI Semiconductor Co., Wonik IPS Co., and PSK Co. are projected to see their operating profits shrink by more than 30 percent from a year ago.