Strong Q1 results seen for autos, refiners

Industry watchers predict earnings surprise for Kia, record profits for S-Oil, SK Innovation


Korean carmakers and oil refineries are expected to report strong first-quarter performances this month on rising demand and favorable external conditions.

The results for steel, electronics and construction sectors are likely to be disappointing, analysts say.

Ahead of the April earnings season, market watchers expect positive outcomes for automobile, oil, retail, shipbuilding and heavy industries with some looking forward to record earnings.

Hyundai Motor Co., the nation’s top carmaker, is projecting a sharp rise in profits due to the rising overseas sales and the increase in factory operation abroad.

Quarterly sales for the firm are expected to rise more than 10 percent compared to the same period last year, reaching 9.2-9.3 trillion won ($8.46-8.55 billion), with operating profit increasing by more than 20 percent to 840 billion won.

Hyundai Motor’s sister firm Kia Motors, the second-largest automaker here, is most likely to record an earnings surprise ― sales up 30 percent to reach 5.9-6.5 trillion won and operating profit surging about 60 percent up to 490 billion won ― mainly because of the rising popularity of its new cars, said industry sources.

Hyundai’s global sales rose 1.7 percent this year to number 324,959 units, up from 319,553 units sold in March last year, while its domestic sales rose 4.6 percent to 62,013 vehicles.

Kia Motors also showed a steady growth in both domestic and overseas sales with units sold this year soaring 23.1 percent and 32.2 percent from a year earlier, respectively.

Oil refiners are also optimistic, with SK Innovation and S-Oil expected to reach record operating profit ― 750 to 850 billion won and 600 to 700 billion won ― for this first quarter, respectively.

Gasoline prices have been escalating since last October and the average gasoline price nationwide last month was 1,951.28 won, exceeding the highest record of 1,950,02 won in July 2008.

The record-breaking profits resulted from the ongoing political unrest in the Middle East and the unstable supply of oil due to Japan’s massive earthquake.

Quarterly profits for the sectors of shipping and heavy industries and those in the distribution business seem to be bright as well, with all three industries recording more than a 10-percent increase compared to last year.

But there are several players unsatisfied with the earnings report for the first quarter.

Samsung Electronics, which posted record high earnings last year, is predicted to reach 37 trillion won in sales and between 2.9 trillion won and 3.2 trillion won in operating income for the period of January-March.

The figure is lower than that of the same period last year, mainly because of the fall in price of panels and the low sales of wireless devices such as tablet PCs and smartphones.

LG Electronics, however, performed comparatively better than its rival, estimated to record 14 trillion won in sales and 100 billion won in operating profit, making a comeback from its sluggish sales in the second half of last year.

Steelmakers like POSCO and Hyundai Steel are unlikely to post better performance compared to last year because under a government campaign to fight inflation they had to refrain from raising prices despite surging materials costs.

Construction firms are also not hopeful as the first quarter was a slow season and some projects in the Middle East were stopped due to the political unrest.

However, the country’s semiconductor, shipbuilding and refining industries are projected to see a turnaround, recording a sharp rise in exports in the next quarter with less competition from their Japanese rivals, said a recent report released by the Korea Chamber of Commerce and Industry.

Local chipmakers and oil refiners are poised to benefit from a supply shortage in Japan and local shipbuilders will get more orders from the rising demand for oil tankers and other vessels, it said.

But it also added that the production disruptions in Japan could negatively impact Korean automakers for they import parts from the neighboring country.

By Cho Ji-hyun (sharon@heraldcorp.com)