Performance of Top Conglomerates
The top management of the major conglomerates Samsung, Hyundai Motor, SK and LG are getting edgy as the year-end settlement of accounts and promotion screening for 2014 are drawing near. Although the business performance does not tell everything about their capabilities, it cannot be underestimated, because the account settlement data has much to do with the external image of each business group and its share price.
According to market sources, assuming a cumulative performance of up to the third quarter, executives of Samsung Electronics, Samsung Electro-Mechanics, and Cheil Worldwide are expected to get a more positive review this year than their peers in the other subsidiaries of the Samsung Group. Samsung Electronics increased its sales and operating profits by 16.75% and 41.88% this year, respectively. In addition, it broke the 10 trillion won (US$9.5 billion) mark in quarterly operating profits in Q3 for the first time since its inception.
Nevertheless, there are some differences among the business units. The IT and Mobile (IM) Division, which is in charge of the company’s smartphone business, is considered the best contributor to the record high sales, whereas the Consumer Electronics (CE) Division fell short of expectations due to the global market slowdown. The IT and Mobile Division recently scouted former Nokia Siemens Networks (NSN) CEO Simon Beresford as its global executive advisor, too. The operating profits of Samsung Electro-Mechanics and Cheil Worldwide are expected to increase 18.08% and 16.20% from a year earlier as well.
Meanwhile, Samsung SDI, Samsung Fine Chemicals, and Samsung Engineering had an unsatisfactory year in 2013. The business profits of the first two fell by 74.95% and 77.13% compared to a year ago, respectively. Samsung Engineering has turned a deficit.
Most of Hyundai Motor Group’s subsidiaries are in the same boat. Hyundai Motor Company’s profits fell 3.22%, even though it succeeded in raising its annual sales by 6.77%. Kia Motors and Hyundai Steel are likely to record a 13.8% and 29.57% decrease in operating profits, respectively. Hyundai Engineering and Construction is forecast to have increased its figures by 6.68% and 12.28%, despite the adverse market conditions.
In the SK Group, SK Hynix is distinguishing itself. The semiconductor manufacturer recorded a deficit of 297.4 billion won (US$281.9 million) last year, but is predicted to enjoy 2.5809 trillion won (US$2.4465 billion) in operating profits this year. Though it ranks fifth on the sales list, it is at the second spot in the group when it comes to business profits. SK Telecom and SK C&C also improved their profitability, but SK Networks and SK are forecast to show a double-digit decline in operating profits year-on-year.
Most of LG Group’s subsidiaries improved their profitability in 2013. In particular, LG U+ is estimated to have boosted its profits by 1,805.93%, although the sales increase stands at 3.81%. LG Life Sciences increased its sales by 8.79% and showed a profit turnaround. The profits of LG Display and LG Hausys are expected to be more than double from a year earlier, as well. However, LG Chem and LG International Corporation are likely to have suffered some decreases in sales and business profits alike.