The Korea Herald


Rebound unlikely in sectors reeling from COVID-19

By Son Ji-hyoung

Published : Sept. 10, 2020 - 18:26

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(Yonhap) (Yonhap)
Domestic industrial sectors that are reeling from the coronavirus fallout in South Korea are unlikely to see a drastic rebound and probably face longer-lasting financial strain, officials of credit rating agency the Korea Investors Service said Thursday.

Korean businesses dedicated to auto parts manufacturing, oil refining, hotels, duty-free shops, theaters and aviation are seeing a negative credit outlook and facing heightened financial pressure, making them subject to credit downgrading in the second half of 2020.

“Businesses affected by the coronavirus are unlikely to rebound from the performance in the second quarter,” said KIS senior analyst Kwon Ki-hyuk in a briefing held via webcast Thursday.

The sectors took huge operating losses in the second quarter, showed data from KIS.

Movie theater operators, hotel and duty-free shop operators, refineries and auto part makers all saw operating losses in the second quarter. The most heavily affected, movie theaters, logged a 224.7 billion won ($189.2 million) combined operating loss during the April-June period, a sharp contrast with their 61.8 billion won operating profit a year earlier.

An exception was the aviation industry, which turned around on-quarter to record a 19.8 billion operating profit during the April-June period.

However, the surprise performance -- largely the result of a decision to emphasize cargo transport -- will be short-lived unless the airliners bring passenger travel back to normal with the end of the coronavirus, KIS senior analyst Won Jong-hyun said.

In the meantime, given that the state-led contingency measures such as funds to buy bonds will not continue indefinitely, companies suffering liquidity issues may face the threat of corporate restructuring if they fail to address their worsening balance sheets independently, said Yoo Kon, head of the corporate finance group at KIS.

By Son Ji-hyoung (