Korean companies suffer deficit or drop in Q2 earnings amid eurozone crisis


Half of the listed companies in South Korea that have reported second quarter earnings marked a deficit or decrease, according to a report released Sunday.

About a quarter of firms seriously underperformed expectations.

Among 69 companies that announced second-quarter earnings as of Friday, five marked a deficit and 29 reported a drop in operating profit, said Fn Guide, online stock information provider.

Most of those who reported lower-than-expected earnings were petrochemical, energy and steel manufacturing companies, which were impacted by the European financial crisis and lower materials prices. In case of energy chemical companies, the sluggish Chinese economy and drop in oil prices were also major causes for poor earnings.

Companies that fell into the red include S-Oil with a loss of 161.2 billion won ($142 million), SK Innovation with 15.3 billion won, Honam Petrochemical Corporation with 32.4 billion won and LG Display with 25.5 billion won.

Among the 29 which reported decreased profits compared to the previous quarter, SK Hynix’s earnings dropped the most, by 94.9 percent, to 22.9 billion won. The decrease of NAND flash device prices were analyzed to be the main cause.

Earnings of LG Uplus fell by 94.8 percent, Kumho Petrochemical by 89.5 percent, Korea Exchange Bank by 82.8 percent, OCI by 74 percent, Samsung Techwin by 71.8 percent, Woori Financial by 66.4 percent and POSCO by 39 percent.

Over 24 percent of the companies also experienced an “earnings shock” as profits dropped more than 10 percent below what local brokerages expected.

The gap between the market consensus on LG Uplus earnings and its actual earnings was the biggest by 78.4 percent. Fn Guide attributed the gap to the company’s heavy spending on marketing in order to enhance its presence in the Long Term Evolution market.

Other companies that showed large gaps between the market outlook and actual earnings include SK Hynix (64.9 percent), LG Innotek (44.9 percent), Kumho Petrochemical (44 percent), Woori Financial (41.9 percent), POSCO (20.3 percent) and Hankook Tire (16.2 percent).

Meanwhile, top IT companies and carmakers announced high earnings. Samsung Electronics marked over 6.72 trillion won operating profit, a 14.93 percent increase compared to the previous quarter and 79.22 percent increase compared to the same period last year.

Earnings of Hyundai Motors and Kia Motors also increased by 17.6 percent and 18.1 percent, respectively, compared to the same period last year.

By Park Min-young  (claire@heraldcorp.com)