Firms bogged down by Q3 woes

Fears of an earnings shock are sweeping across Korean industries as several major companies have already reported sharply declining profits in the third quarter.

Amid economists’ diagnosis that the Chinese and U.S. economies hit bottom in the three months to September, both Korean companies’ exports and domestic sales have been worse than expected.

Businesses are undercutting their earnings forecasts for the third quarter, although they are hopeful things will perk up in the final quarter of this year.

“A strong downward adjustment is evident across all industries for their third- and fourth-quarter earnings,” said Lee Kyung-soo, a researcher at Shinyoung Securities.

“Korean companies’ Q3 and Q4 operating profit estimates have recently been lowered by 1.4 percent and 0.8 percent, respectively, from last week.”

Korea’s exports in July, August and September continued to shrink from a year ago. China’s economic growth hit 7.4 percent in the third quarter, prodding many pundits to say it bottomed out. The U.S. economy also bottomed out in the third quarter but is widely expected to start picking up from the remaining three months of this year.

Of the 118 major listed companies for which at least three brokerages have announced earnings outlooks, 77.1 percent, or 91 firms, saw their third-quarter operating profit projections drop from early this month.

Operating profit estimates for 21 companies rose, but only by up to 8 percent, while three others saw no change, according to the Financial Supervisory Service and financial information provider FN Guide.

The three remaining companies are likely to see losses and one of them greater losses compared to the previous quarter, according to the brokerages.

Third-quarter earnings forecasts had been going downhill for most companies as the earnings report season drew near.

Aside from Samsung Electronics announcing a surprising third-quarter operating profit of over 8 trillion won ($7.25 billion) in early October, earnings outlooks for SK, Hyundai Motor, SK Innovation, POSCO, Hyundai Heavy Industries, LG Electronics, Kia Motors and S-Oil have all dipped from then.

Earnings forecasts plunged most sharply for airliners, shipping companies, steelmakers, telecoms, banks and machinery makers.

As for telecoms, the projected quarterly operating profit of LG U Plus tumbled 47.4 percent from 40.3 billion won in early October to 21.2 billion won recently.

SK Telecom’s was revised down by 15.4 percent, and KT by 6.3 percent.

Those for Asiana Airlines, Korean Air and Hanjin Shipping fell 17.4 percent, 8.1 percent and 17.1 percent, respectively, in less than a month.

Banks are bound to see an earnings shock, a top executive at a local bank said.

The estimated third-quarter operating profit of Hana Financial Group slid 21.7 percent to 440 billion over the past three weeks, KB Financial Group by 12.5 percent, Industrial Bank of Korea by 11.8 percent, Woori Financial by 9.5 percent, Shinhan Financial Group by 8.4 percent and Korea Exchange Bank by 7.2 percent.

Earnings shock is a reality for companies that already announced their estimated earnings.

Samsung Techwin on Monday announced a third-quarter operating profit outlook of 36.9 billion won, down 30.4 percent from the previous quarter and much lower than earlier forecasts.

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