First-Quarter Profits At Top Concerns Sink

Hit by the slowing economy, Korea's 201 leading corporations saw their net profit for the first three months of this year plunge by nearly 41 percent year-on-year, with sales growing a mere 2.1 percent, according to preliminary data released Thursday by SK Securities Co.

The brokerage house published the estimated figures in a report that analyzes performances of 201 publicly-traded local companies with a market capitalization of 50 billion won ($36.6 million) or more and that close their books for the fiscal year at the end of December. Businesses under debt-restructuring programs, market-supervised firms and financial institutions were not included in the study.

The securities firm estimates in the report that the 201 companies recorded a combined net income of 3.9 trillion won during the three months through March, down 40.8 percent from the comparable period last year. Their ordinary profit also slid 28.5 percent year-on-year during the first quarter, while operating profit skidded 10.6 percent.

The report attributes the profit decline to a plunge in the international prices of Korea's major exports, including semiconductors and steel products, and a surge in foreign exchange losses in the wake of the sliding won.

It put first-quarter sales by the firms at 99.2 trillion won, up 2.1 percent from a year earlier and down 13.1 percent from the previous quarter.

"Sales slumped, as the companies let much of their factory capacity stand idle because of stockpiles of unsold products," said an SK Securities analyst, Jeon Woo-jong. "Considering a 13-percent decline in the the won's value during the first quarter, local companies' sales, much of which are exports, have dropped effectively."

The report predicts that the domestic companies will continue to perform poorly in the second quarter due to the economic downturn, with sales growing 1.4 percent and operating profit falling 5.4-percent. Their performance will begin to improve in the second half of this year, when the economy is expected to recover, it adds.

Analysts said that local stock prices will be affected according to each firm's first-quarter performance.

Samsung Electronics Co. led the other firms with a net profit of 1.05 trillion won during the January-March period, but the figure was down 34 percent from a year earlier due to falling global chip prices and slumping sales of thin-film transistor liquid crystal displays.

Pohang Iron & Steel Co. saw its net income plummet 71.3 percent to 378 billion won during the same period because of sinking global steel prices.

Oil-refining companies and commercial airlines were hit hard by the won's weakness. Despite a 4.4-percent rise in sales, SK Corp. suffered a 82-percent decline in net income. Asiana Airlines incurred a net loss of 67.6 billion won in the first quarter, compared with a 53.7-billion won profit a year earlier.

In contrast, telecommunications firms enjoyed a sharp increase in their profitability largely due to the abolition of cell-phone subsidies.

SK Telecom Co.'s sales inched up a mere 1.5 percent, but its net profit surged 46 percent to 280 billion won; Korea Telecom Freetel saw its net income skyrocket 1,158 percent to 70 billion won.

Hyundai Motor Co. reported a 5.3-percent rise in profit due to healthier exports, and Kia Motors Inc. reported a 23.7-percent jump. Both companies were helped by the bankruptcy of their domestic rival, Daewoo Motor Co.

by Kim Kwang-ki