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Gloomy projection dominates Q4 earnings

Jan. 4, 2012 - 15:32 By Korea Herald
But Samsung, Hyundai, LG buck the trend by posting higher operating income

Korea’s major companies are expected to post slower earnings in the fourth quarter of last year, hurt by slowing demand amid growing worries over the eurozone debt crisis, data showed Wednesday.

According to brokerages’ estimates compiled by financial information provider FnGuide, Korea’s top-ranked business groups such as Samsung are likely to achieve lower-than-expected profits in the forthcoming earnings season.

Key factors include the continued debt troubles affecting European countries and slower growth in China, the biggest trading partner for export-dependent Korea.

The broader weakness of the global economy tends to undercut the Korean economy, which depends heavily on exports to boost its growth.

Brokerages’ data showed that the combined operating income of 108 listed firms here would reach 27.5 trillion won in the October-December period, down 5.49 percent from 28.6 trillion won the previous quarter.

The downward trend accelerated toward the end of the year. The figure was 30.4 trillion won in the first quarter and 29.9 trillion won in the second.

Although there may be some unexpected strong results from select firms that might offset the total of the projected fourth-quarter earnings, analysts said the external uncertainties seemed to have hurt Korean companies.

One particularly troubled sector is airlines. Korean Air’s operating profit is forecast to slump nearly 40 percent on-quarter to 144 billion won in the fourth quarter of last year. Asiana Airlines is also set to see its earnings slide by 30 percent to 119 billion won during the same period. Both carriers were hit by higher oil prices.

Chemical firms such as KP Chemical and Honam Petro Chemical are speculated to have gone through a rough quarter, with their earnings plunging by as much as 31 percent.

POSCO, a leading steelmaker, is likely to see slower operating profit as the estimate is set at 1.19 trillion won.

SK Group, which has six listed firms, is also set to post disappointing fourth-quarter earnings. The projected operating income of those units is 2.9 trillion won, down 42.75 percent from the third quarter.

Samsung Electronics, however, remains solid, despite the gloom that plagued the corporate sector. The company, which makes up the biggest portion of the country’s benchmark KOSPI in terms of market capitalization, is expected to post 4.7 trillion won in operating income in the fourth quarter, up 11.8 percent from the third quarter, helped by strong sales of smartphones led by its Galaxy lineup that competed against Apple’s iPhone on the global market.

Samsung, a flagship unit of Samsung Group, put out stronger third quarter results, which boosted expectations for the fourth quarter, which included the holiday shopping season. Samsung Group’s combined operating profit is estimated at 5.6 trillion won.

The estimated earnings for Hyundai Motor are also upbeat. The automaker is forecast to post 2.2 trillion won in operating income in the October-December period, up 13.36 percent from the previous quarter. Analysts said Hyundai might have pulled off profit growth in the final quarter of last year. Hyundai Group’s total operating profit is forecast to reach 4.8 trillion won.

LG Group’s performance also strengthened significantly. The projected total of operating income by LG’s ten listed affiliates is set to reach 1.2 trillion won in the fourth quarter, up 74.69 percent from the third quarter. The sharp rise is helped by LG Electronics, which will announce a profit in the final quarter, reversing from a loss of 31.9 billion won in the third quarter last year.

By Yang Sung-jin (