LG set to swing to profit, Samsung expects record earnings as sector eyes 38% profit jump


Korea’s key IT companies are expected to post solid earnings for January-March this year, data showed Thursday.

The most striking feature in the current quarter is that LG Electronics is set to swing to profit, restoring confidence among investors following a dismal performance last year, according to the stock information company FnGuide.

Samsung Electronics, Asia’s biggest technology company, is also sailing smoothly, with its earnings expected to top expectations. Hyundai Motor, one of the country’s major exporters, is also sprinting ahead.

Refinery, telecommunications, distributions and steelmaking sectors, on the other hand, face an uphill battle in the first quarter.

FnGuide’s compiled earnings data projected that Korea’s 113 listed firms would post a combined revenue of 361.5 trillion won ($320.2 billion) in the first three months of this year, up 9.3 percent from the year before.

But their combined operating profit is forecast to slump 8.25 percent on-year to 23.6 trillion won during the cited period.

The IT sector, made up of 19 firms, is expected to see its first-quarter operating profit jump 38.33 percent on-year. Traditional defensive stocks in consumer goods are also expected to fare well.

Telecommunication firms, in contrast, are forecast to see their operating income drop 25.68 percent. Energy, component and industrial materials sectors also confront strong headwinds, with their projected operating profit all in the red.

Investors and analysts are paying more attention to LG Electronics in recent weeks, as its earnings seem to be on an upswing. Last year, the company struggled hard due to the sluggish sales of its key items such as mobile phones, but it regained its footing in the market early this year.

FnGuide’s estimate is that LG’s operating profit will jump 53.55 percent on-year to 290 billion won in the first quarter of this year. Net income should also swing to a profit of 119.4 billion won.

LG’s turnaround came from its shift in focus toward smartphones, investing aggressively in new, high-powered models.

LG is also set to benefit partly from the forthcoming London Olympic Games, which will boost demand for upscale 3D TV sets in the coming months.

Samsung Electronics, which ranks top in market capitalization on the KOSPI, is likely to see its operating profit reach 4.57 trillion won in the first quarter, up 55.2 percent from the year before, according to projections by brokerages.

More encouraging is the outlook that Samsung will maintain its growth momentum in the second quarter as well, achieving a record operating profit of 5.3 trillion won, up about 41 percent from the second quarter last year. Samsung’s all-time record operating profit was set in the second quarter of 2010 when it earned 5.14 trillion won.

Korean automakers such as Hyundai Motor continue to put out new models that are being well received both at home and abroad. Although January and February are regarded as a slow season for carmakers, Hyundai and Kia steered forward at a brisk pace, with their first-quarter operating profits set to hit 2.09 trillion won and 967.6 billion won, respectively. The projections are a 14-15 percent increase from the same period a year earlier.

Daishin Securities said local carmakers are also poised to broaden their share in the U.S. market as the free trade agreement went into effect.

POSCO, meanwhile, is forecast to post 824.8 billion won in operating profit in the first quarter, down 39.17 percent from a year earlier, largely due to declining demand from China. Its net profit is also expected to shrink 38.3 percent during the same period.

By Yang Sung-jin (insight@heraldcorp.com)