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Korea’s listed firms’ earnings to shrink 17% in Q1 amid coronavirus pandemic

(Yonhap)
(Yonhap)

South Korea’s listed companies are likely to post poor earnings results for the first quarter due to the escalating fallout from the novel coronavirus pandemic, a financial market tracker said Sunday.

The combined operating profits of 141 listed companies are expected to mark 16.79 trillion won ($13.6 billion) in the January-March period this year, down 20.22 trillion won, or 16.92 percent, from a year ago, according to data compiled by FN Guide.

If the projection turns out to be roughly correct, then the firms will record double-digit earnings declines for two consecutive years.

Also, according to the Korea Exchange, the combined operating profits of 573 firms listed on the main bourse Kospi came to 27.8 trillion won in the first quarter last year, down 36.88 percent on-year.

Market watchers earlier estimated that the local firms would show a solid recovery trend from the first quarter, posting strong earnings of 22.84 trillion won, up 9.24 percent from a year earlier. But since the country reported the first case of COVID-19 on Jan. 20, they have drastically lowered expectations by 23.95 percent, as of Friday.

Among the 141 listed firms, 72 of them such as SK hynix, LG Electronics, Posco, Hyundai Mobis and Kia Motors are expected to see their profits tumble. SK Innovation is likely to record a deficit of 472.9 billion won in the cited period.

Along with Hyundai Motor and Samsung C&T, Samsung Electronics is expected to post relatively solid earnings, as its chip business is likely to offset losses in the smartphone and consumer electronics sectors.

Samsung Electronics will announce its first-quarter earnings guidance Tuesday. While the tech giant’s estimated operating gain is nearly 6.24 trillion won on average, analysts here said that investor sentiments in the local stock market will vary depending on whether the firm’s profit reaches 6 trillion won.

“Local firms’ upcoming first-quarter earnings announcements mean a lot since they are the first event to estimate how big the impact was on stock fundamentals amid the COVID-19 pandemic,” said Kim Yong-koo, an analyst at Hana Financial Investment.

“Kospi index will fluctuate along with Samsung Electronics’ first-quarter earnings guidance announcement, followed by other local firms,” said Kim Byung-yeon, an analyst at NH Investment & Securities. “Although Samsung’s operating profits may fall short of the average estimated figure, it’s important whether to surpass the lowest estimation of 5.6 trillion won.”

Hanwha Investment & Securities on Friday lowered its estimated operating gain of Samsung Electronics from 6.43 trillion won to 5.77 trillion won, along with its target price from 70,000 won to 60,000 won.

Lee Soon-hak, an analyst at the brokerage firm, forecast that it is inevitable for the tech giant to avoid a business slump in the first quarter and extend its poor earnings until the second quarter, experiencing a sharp drop in smartphone and television sales caused by the coronavirus.

By Jie Ye-eun (yeeun@heraldcorp.com)
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