Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Hanwha Group pulled down by struggling financial units
Hanwha Life Insurance headquarters in Seoul / Courtesy of Hanwha Life Insurance
By Park Jae-hyuk
By Park Jae-hyuk
The stock price of Hanwha Corp., the de facto holding firm of Hanwha Group, plunged 7.85 percent to 27,000 won ($20), Monday, after its second-quarter earnings fell short of market expectations.
Despite the rosy outlook for the group's weapons and energy businesses, Hanwha Corp. announced last Friday that its second-quarter revenue fell 10.53 percent year-on-year to 12.1 trillion won. Its second-quarter operating profit dropped 77.71 percent year-on-year to 298.7 billion won.
Securities analysts attributed the disappointing results mainly to Hanwha's financial subsidiaries, which suffered earnings shocks.
“The group's financial units posted an operating profit of 154.2 billion won for the second quarter, down 82.6 percent from the previous quarter's 885.5 billion won,” Daishin Securities analyst Yang Ji-hwan said.
He also lowered Hanwha Corp.'s stock price target by 22.5 percent to 31,000 won.
During the second quarter, Hanwha Life Insurance suffered a 47.41 percent year-on-year decline in its sales to 2.49 trillion won and a 59.36 percent year-on-year fall in its operating profit to 60.3 billion won.
In particular, its second-quarter operating profit was 84 percent smaller than the previous quarter's 376 billion won.
As a result, the worsening profitability of Hanwha Group's overall financial units was not offset by Hanwha General Insurance's 134.5 billion won operating profit for the second quarter, up 55.8 percent from the same period last year.
“Our previous year's earnings were based on the International Financial Reporting Standard (IFRS) 4, so it is impossible to compare our latest performance directly with the previous year's,” Hanwha Life said in its regulatory filing, unveiling its plan to explain further details about its earnings during a conference call slated for Thursday.
Some minority shareholders suspect Hanwha of restraining its de facto holding firm's stock price intentionally to keep it low, so Chairman Kim Seung-youn can avoid higher taxes when he hands over control of the group to his three sons.
Hanwha Life Insurance President Kim Dong-won / Courtesy of Hanwha Life Insurance
Hanwha Group's financial subsidiaries have been led by the chairman's second-oldest son, Hanwha Life President Kim Dong-won.
The oldest son, Hanwha Group Vice Chairman Kim Dong-kwan, has taken charge of leading the group's flagship defense systems, energy and chemical businesses, while the youngest son, Hanwha Hotels & Resorts Executive Director Kim Dong-seon, is in charge of directing the group's retail units, including department stores and restaurants.
Last year, a group of minority shareholders of Hanwha Corp. held a rally in front of the Hanwha Group chairman's home and the conglomerate's headquarters in Seoul, claiming that the company's stock price has been underestimated in order to facilitate a family succession.
If Hanwha Corp.'s stock price remains low throughout this year, the group is expected to face protests from its minority shareholders once again.
In response, Hanwha Corp. has denied the connection between its stock price and the family succession issue, promising that it will listen to its minority shareholders and keep making efforts to enhance its shareholder value.