Eurozone crisis dealing blow to Korean firms

A variety of economic indices show that Korean manufacturers are exposed to the eurozone fiscal crisis, whose negative impact on local major conglomerates’ production could be amplified in the latter half of the year.

According to FnGuide, a provider of corporate financial statements, seven of the nation’s 10 major business groups are estimated to post a drop in their earnings for the first half of the year amid the eurozone woes and weak domestic demand.

Its estimates suggested that the seven conglomerates ― SK, Lotte, GS, Hanwha, Hyundai Heavy Industries, POSCO and Hanjin ― would report a fall in their operating profit.

Hanwha Group is likely to mark the sharpest fall of 53.5 percent in operating profit between January and June on a year-on-year basis.

Lotte is estimated to record a drop of 36.8 percent, followed by Hyundai Heavy Industries with 35.7 percent, GS with 34.4 percent and POSCO with 32.2 percent.

The FnGuide data projected that eight units of SK Group would post 5.9 trillion won ($5.16 billion) in combined operating profit in the first half, down 21.7 percent over the same period last year.

The automotive industry also had to suffer a certain impact from the external factors, recording sagging vehicle sales at home.

Hyundai Motor and its affiliate Kia Motors saw their first-half sales in the local market drop on a year-on-year basis.

Hyundai Motor posted 328,113 units in vehicle sales between January and June, down 4.7 percent from 344,138 units over the same period last year.

Kia Motors reported a 3.7 percent on-year drop from 248,345 units to 239,138 units.

Many research analysts predict that the eurozone debt crisis is expected to continue to affect the local major groups in the coming months.

The nation’s corporate finance index fell for the third quarter, reflecting concerns that persistent global economic woes will adversely affect cash flows for businesses, a poll showed.

The business survey index on corporate finance for the July-September period stayed at 89, a drop of 3 points from the estimate for the current quarter, according to the Korea Chamber of Commerce and Industry.

The FBSI prediction for the second quarter reached 92, up from 79 predicted for the first quarter of 2012.

The survey checked 500 businesses across the country. A reading below 100 means pessimists outnumber optimists, with a reading above the break-even baseline meaning the opposite.

“Ongoing fiscal problems in some eurozone countries that may spread into the banking sector and the slowdown in China’s economic growth are raising cash-flow concerns in the business community as a whole,” it said.

The global economic sluggishness that is hurting the country’s exports and domestic consumption are heightening funding concerns by companies, it added.

The KCCI forecast that small and mid-sized enterprises would be hit the hardest.

The index for SMEs stood at 87, down from 90 for the April-June period.

The figure for large conglomerates stood at 103, a slight gain from 102. Both the manufacturing and non-manufacturing sectors expected difficult times.

Index for funding conditions for stocks, issuing of corporate bonds and bills, and bank borrowing all stood at 95.

By Kim Yon-se (kys@heraldcorp.com)