Estimated profits for local companies pushed down with deepening fiscal crises in Europe


Major Korean companies’ earnings forecasts for next year are falling on rising economic uncertainties as fiscal crises deepen in Europe, with lowered credit ratings for Italy, Spain, Portugal and Belgium.

France may be next as its debt ratio and government bond yields have reached alerting levels.

The combined operating profit estimates of 132 listed companies dropped 8.89 percent from 134.8 trillion won ($116 billion) in July to 122.8 trillion won on Friday, financial information provider FnGuide said Sunday.

The estimated combined net profit of the companies was adjusted downward by 9.74 percent from 109.4 trillion won to 98.7 trillion won.

Projected earnings are likely to tumble further with slowing global demand. Korea’s exports will be hit hard if countries opt for greater austerity.

“Financial markets have been shaken since August, and the uncertainties are likely to remain longer. This will have an impact on corporate and household spending, possibly dealing a blow to the economy,” Lim Hee-jeong, a researcher at Hyundai Economic Research Institute, said.

Oh Hyun-seok, head of investment strategy at Samsung Securities Co. said companies’ earnings forecasts are highly likely to be taken down further in the first quarter of next year when the fourth-quarter earnings are announced.

The extent of revision was the greatest for telecom and utility businesses.

SK Telecom’s operating profit estimate for next year was pushed down by 32.13 percent in the four months’ period from 3.63 trillion won to 2.46 trillion won.

KT Corp.’s declined 10.65 percent from 2.31 trillion won to 2.07 trillion won.

In the utility business, next year’s operating profit estimate for Korea Electric Power Corp. tumbled 31.5 percent from 2.66 trillion won to 1.79 trillion won.

Estimated earnings were halved for several companies of the LG Group ― LG Display by 56.8 percent to 438 billion won, and LG Innotek by 54.1 percent to 94.1 billion won.

LG Electronics and LG Chem saw their operating profit estimates plunge 31.15 percent to 938.6 billion won and by 13.93 percent to 3.31 trillion won, respectively.

Oil refineries also greatly lowered their forecasts: SK Innovation by 14.48 percent, S-Oil by 16.03 percent and GS Caltex by 20.43 percent.

In the financial sector, KB Financial, Samsung Card and Shinhan Financial reduced their estimates by 10 percent, 8.55 percent and 7.49 percent, respectively.

Operating profit estimates of Hanjin Shipping, Hanjin Heavy Industries, OCI and Hanhwa Chemical were lowered by 50.83 percent, 43.78 percent, 43.16 percent and 32.12 percent, respectively.

Outlooks varied in the IT sector.

The estimated operating profit of Samsung Electronics was raised by 9.77 percent to 19.89 trillion won thanks to the third-quarter earnings which exceeded expectations.

The operating profit estimate of Hynix, however, plunged 41.06 percent to 1.22 trillion won.

Samsung Electro-Mechanics and Samsung SDI had theirs pushed down by 29.58 percent and 24.9 percent, respectively.

By Kim So-hyun (sophie@heraldcorp.com)