Korean firms' Q4 earnings seen to jump, led by exporters

Exporters, including Samsung Electronics Co., LG Chem Ltd. and Samsung SDI Co., are estimated to have led a sharp increase in listed South Korean companies' fourth-quarter earnings from a year earlier, outweighing shortfalls in the pandemic-hit airline and travel-related sectors, according to a domestic research company.

Their earnings growth, seen at a faster pace than in the previous three months, was attributable to export growth and a low base effect, with domestic consumption and facility investment showing little signs of recovery.

Combined operating profits of 259 Korean companies, for which consensus estimates are available, are projected to have leapt by 60% to 35.9 trillion won ($32.7 billion) year on year in the fourth quarter, according to FnGuide on Dec. 27.

The estimates compared with their third-quarter earnings of 41.2 trillion won, which represented a 31.7% rise on the year and a turnaround from declines in the first and second quarters of this year. They are set to report fourth-quarter results next month.

“Since the pandemic struck, government subsidies have boosted consumption in developed countries, but that led to inventory drawdowns with factories operating below capacity,” said NH Investment & Securities research head Oh Tae-dong.

“Until the first half of next year, production, rather than consumption, will likely lead earnings growth. The forthcoming Chinese lunar new year holiday will add to the upward momentum of production recovery,” he added.

Among companies, Samsung Electronics, the world's top memory chipmaker, is tipped to report a 39% increase on the year to 9.95 trillion won in October-December operating profit.

SK Hynix Inc. is likely to post a 270% jump to 873.4 billion won in fourth-quarter operating profit, slightly above the estimated 812.8 billion won at LG Chem, which would represent a 4,200% year-on-year surge.

Samsung SDI, an electric vehicle battery maker, is seen to flag a 1,480% jump to 318.1 billion won in quarterly operating profit.

Among automobile-related companies and chemical and steel products makers, Kia Motors Corp., Mando Corp. and Hyundai Mobis Co., as well as steel giant POSCO and POSCO Chemical are projected to have swung to profits in the current quarter. They had posted year-on-year earnings declines in the previous three consecutive quarters.

By contrast, casino operator Kangwon Land and cinema chain company CJ CGV are estimated to have turned to shortfalls in the current quarter. Other domestic consumption-focused companies – Shinsegae, Hyundai Department Store and Hotel Shilla – are expected to report a double-digit drop in fourth-quarter earnings.

“To prepare against economic uncertainty next year, banks and other companies are likely to take a big bath in the current quarter, booking part of this year’s earnings as potential losses,” said Shinhan Investment research head Yoon Chang-yong.

Write to Byeong-Hun Yang at hun@hankyung.com
Yeonhee Kim edited this article.