August 13, 2018 12:46
Some 30 percent of Korea's top listed companies posted worse-than-expected earnings in the second quarter of this year.
According to KB Securities on Sunday, 145 listed companies announced their second-quarter earnings last week, and 43 of them or 29.7 percent suffered earnings shocks with operating profits more than 10 percent lower than what analysts had expected. They came mostly from the IT, auto, telecom and shipbuilding industries, which are among Korea's key exporters. Only 30 of the companies fared better than expected.
Another report by financial data provider FnGuide showed similar results. Out of 155 listed companies, more than half posted operating profits that fell below market expectations, with 58 over 10 percent less.
Signs of reduced profitability are apparent everywhere. According to a recent report by market researcher Strategy Analytics, Samsung's North America sales in the second quarter stood at only 9 million smartphones, the lowest since the third quarter of 2012 and down by 4.4 million compared to the same period last year.
Samsung's phone sales also plummeted in Asia, Africa, the Middle East and Latin America, where cheaper handsets are popular. It sold 21.8 million phones in Asia in the second quarter, down 1.3 million from last year, while sales in Latin America fell by 200,000 to 14 million. In the Middle East and Africa, they fell to 10.6 million, the lowest since the second quarter of 2014.
Display manufacturers, who already ceded the top spot to their cheaper Chinese rivals, posted even more shocking results. LG Display suffered a W228.1 billion operating loss in the April-June period (US$1=W1,129). At Samsung Display, operating profit fell below W6 trillion level for the first time ever. In the fourth quarter of last year, it achieved an operating profit of more than W11 trillion.
Hyundai Motor is also mired in the doldrums. Although its operating profit improved slightly from the first quarter, when it plummeted 45.5 percent from a year earlier, it was still down 29.3 percent on-year.
And despite a surge in Koreans traveling abroad, the airline industry was hit hard by rising fuel prices. Jeju Air and Jin Air's second-quarter earnings dropped significantly compared to the same period of last year, while Korean Air and Asiana Airlines, which have yet to announce their earnings, are also expected to have suffered marked declines.
This sense of crisis is reflected in various future indicators. A key example is the OECD lowering Korea's leading composite index for 15 straight months. Korea was virtually the only member country whose index fell for 15 straight months.
The Bank of Korea and state-run Korea Development Institute's economic outlooks point in the same direction. Sung Tae-yoon at Yonsei University said, "Even until March and April, there were conflicting leading economic indicators, but now almost all indicators are pointing downward."
Yet the Ministry of Strategy and Finance in its economic trend report claims the economy has been "recovering" for the past nine months. This has raised concerns that the government could miss the crucial timing for shock treatments to resuscitate the economy as it buries its head in the sand.
One former head of a state-run economic think tank said on condition of anonymity, "The government continues to stick to an ambiguous stance, resulting in a stubborn adherence to policies that only escalate short-term cost burdens for businesses like the minimum-wage hike and shorter working week. It needs to remain extra vigilant to prevent a severe slump."
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