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Korean firms bogged down by Q3 woes

Publication Date : 24-10-2012


Fears of an earnings shock are sweeping across Korean industries as several major companies have already reported sharply declining profits in the third quarter.

Amid economists’ diagnosis that the Chinese and US economies hit bottom in the three months to September, both Korean companies’ exports and domestic sales have been worse than expected.

Businesses are undercutting their earnings forecasts for the third quarter, although they are hopeful things will perk up in the final quarter of this year.

“A strong downward adjustment is evident across all industries for their third- and fourth-quarter earnings,” said Lee Kyung-soo, a researcher at Shinyoung Securities.

“Korean companies’ Q3 and Q4 operating profit estimates have recently been lowered by 1.4 per cent and 0.8 per cent, respectively, from last week.”

Korea’s exports in July, August and September continued to shrink from a year ago. China’s economic growth hit 7.4 per cent in the third quarter, prodding many pundits to say it bottomed out. The US economy also bottomed out in the third quarter but is widely expected to start picking up from the remaining three months of this year.

Of the 118 major listed companies for which at least three brokerages have announced earnings outlooks, 77.1 per cent, or 91 firms, saw their third-quarter operating profit projections drop from early this month.

Operating profit estimates for 21 companies rose, but only by up to 8 per cent, while three others saw no change, according to the Financial Supervisory Service and financial information provider FN Guide.

The three remaining companies are likely to see losses and one of them greater losses compared to the previous quarter, according to the brokerages.

Third-quarter earnings forecasts had been going downhill for most companies as the earnings report season drew near.

Aside from Samsung Electronics announcing a surprising third-quarter operating profit of over 8 trillion won (US$7.25 billion) in early October, earnings outlooks for SK, Hyundai Motor, SK Innovation, POSCO, Hyundai Heavy Industries, LG Electronics, Kia Motors and S-Oil have all dipped from then.

Earnings forecasts plunged most sharply for airliners, shipping companies, steelmakers, telecoms, banks and machinery makers.

As for telecoms, the projected quarterly operating profit of LG U Plus tumbled 47.4 per cent from 40.3 billion won in early October to 21.2 billion won recently.

SK Telecom’s was revised down by 15.4 per cent, and KT by 6.3 per cent.

Those for Asiana Airlines, Korean Air and Hanjin Shipping fell 17.4 per cent, 8.1 per cent and 17.1 per cent, respectively, in less than a month.

Banks are bound to see an earnings shock, a top executive at a local bank said.

The estimated third-quarter operating profit of Hana Financial Group slid 21.7 per cent to 440 billion over the past three weeks, KB Financial Group by 12.5 per cent, Industrial Bank of Korea by 11.8 per cent, Woori Financial by 9.5 per cent, Shinhan Financial Group by 8.4 per cent and Korea Exchange Bank by 7.2 per cent.

Earnings shock is a reality for companies that already announced their estimated earnings.

Samsung Techwin on Monday announced a third-quarter operating profit outlook of 36.9 billion won, down 30.4 per cent from the previous quarter and much lower than earlier forecasts.


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