By Oh Young-jin
Staff Reporter
Is Korea Inc. expecting a bumper year?
According to data from a variety of securities analysts, 511 listed firms are expected to record close to 100 trillion won ($83 billion) in net profit this year.
This figure would be a record, up 71 percent from last year. Next year, experts believe that the aggregate net profit will outstrip this year’s.
FN Company Guide, quoted by Yonhap News, says that the 511 listed firms including banks and financial institutes are projected to reach 99.43 trillion won prior to the implementation of a new international accounting system.
The top 20 firms by market cap are projected to hit 56.7 trillion won, accounting for more than half the target, which confirms big firms are the prime engine of the national economy.
The number of firms that will record a net profit of 1 trillion won or more this year is expected to rise to 21, up from 14 last year.
The main stock exchange overwhelms the smaller, tech-heavy KOSDAQ in terms of net profits, with its listed 274 firms expected to generate 95.5 trillion won.
Next year, the net profits are expected to jump past 108 trillion won.
Some analysts say that the robust projections are evidence of a stronger Korean economy that is gaining steam amid a nascent global recovery, citing its strong performance that is coming at a time when Europe is swooning from a debt crisis following the subprime crisis. The OECD, the club of rich nations, is telling Korea to start an exit plan from a stimulus-pumped economy, with a cautious Finance and Strategy Minister Yoon Jeung-hyun giving a series of hints that he would not disagree with a key rate raise by the Bank of Korea.
Others say that it is too premature to smell the roses, saying that Korea’s economy is more than 80 percent dependent on exports so the current rosy picture may turn out to be a mirage, if the global market situation takes a turn for the worse.
Hyundai Securities’ comparison, also provided by Yonhap News, between Korea and member countries of the MSCI index by Morgan Stanley, illustrates how Korea’s economy has been faring well in the turbulence the global economy is undergoing.
The analysis shows that Korea Inc. is expected to improve its net profits by 50.7 percent.
China and India are projected to turn in improvements in the 20 percent range, while the United States, France, the United Kingdom and Europe will be in the 30 percent range.
For Korean firms, their net profits are expected to peak in the third quarter. A total of 399 listed firms’ collective net profits were tallied at 20.8 trillion won and are expected to reach 23.9 trillion won in the second quarter; 24.2 trillion won in the third quarter and 22.2 trillion won in the fourth quarter.
Samsung Electronics is forecast to raise its net profit from 9.6 trillion won last year to 15.3 trillion won this year or about 58 percent.
In terms of operating profits, about 499 firms excluding financial institutes are expected to record 93.8 trillion won, up 65 percent from 56.7 trillion won last year. Samsung is expected to more than double its operating profits from 6.4 trillion won.
For the second quarter, the FN Company Guide says that by industry, semiconductors and automobiles are the key engines.
For the second quarter, Samsung is forecast to post 3.8 trillion won in operating profits, up a staggering 254 percent from the same quarter a year ago and 23 percent from the first quarter.
Hynix Semiconductor is set to turn in 919 billion won for the second quarter, resetting the previous record of 913 billion won in the fourth quarter of 2006. Hynix is expected to make an unmistakable turnaround from its hemorrhaging bottom line this year, getting on a solider basis for a takeover.
Hyundai Motor is also helping Korea Inc.’ juggernaut, with its operating profit expected to go up 22 percent to 802 billion won.
Asiana Airlines, Korean Air and Hyundai Merchant Marine are also expected to turn in a good performance.
Besides those mentioned above, the list of top-earning firms illustrates the growing heft of Korea Inc. They include POSCO, Hyundai Heavy Industries, LG Electronics, LG Display, Woori Financial. Shinhan Financial, SK Telecom, LG Chem, Hyundai Mobis, Kia Motors, SK Energy, Samsung Life Insurance, IBK, Korea Exchange Bank, KT, KB Financial, Korea Electric Power Corp. All of them are showing significant improvements on their bottom line.
Securities analysts, however, are taking a wait-and-see attitude about how this excellent corporate performance will be reflected on the stock markets.
The corporate performances for the fourth quarter last year were not bad, followed by the stellar performances in the first quarter. But the impact on the market turned out to be limited because of the PIGS problem. The abbreviation stands for Portugal, Ireland (or Italy), Greece and Span, which are seeing their economy in bad shape after years of self-indulging debt-based spending sprees.
Some, however, have higher hopes this time than before, arguing that risk factors have been well reflected in the current stock prices so any good news will add to the market’s bull power.
Of course, the good news comes in a variety of shapes and colors.
For instance, the banking industry’s red-hot performance in the first quarter is expected to cool a bit for the second quarter. The main reasons are additional provisions for the construction industry’s restructuring and a reduction in net interest margins (NIMs) coming as the result of a low interest rate.
Dongbu Securities, cited by Yonhap News, estimates the combined net profit of nine leading financial groups and listed banks will reach 2.35 trillion won in net profit, about one quarter down from the first quarter.
Shinhan, the top earner in the first quarter, is expected to see its net income go quarter to quarter from 779 billion won to 603 billion won; KB from 573 billion won to 403 billion won; Woori from 573 billion won to 370 billion won; Hana 324 billion won to 246 billion won.