Combined Profit of Listed Firms Likely to Fall in 2019
Excluding Samsung Electronics Co., the aggregate net profit of South Korean firms listed on the main stock exchange declined as much as 10 trillion won (US$8.80 billion) last year. Their profit plunged in just one year after hitting an all-time high in 2017.
The combined operating profit of 540 companies listed on the Korea Composite Stock Price Index (KOSPI) reached 157.69 trillion won (US$138.69 billion) in 2018 on a consolidated basis, up 510.10 billion won (US$448.64 million), or 0.3 percent year-on-year, breaking a record high of 157.18 trillion won (US$138.24 billion) in 2017, according to data released by Korea Exchange (KRX) on April.
However, their combined net profit fell 7.78 trillion won (US$6.84 billion), or 6.72 percent, to 107.96 trillion won (US$94.95 billion) during the same period. The figures showed a significant drop compared to 2017 when the operating profit increased 28 percent and net profit more than 40 percent on-year to 114.59 trillion won (US$100.79 billion).
When excluding Samsung Electronics, which accounts for most of the total, the operating profit slid 4.73 trillion won (US$4.16 billion), or 4.6 percent, while the net profit decreased 9.94 trillion won (US$8.74 billion), or 13.5 percent. The combined operating profit in 2017 reached an all-time high at 104.10 trillion won (US$91.55 billion) even when excluding Samsung Electronics. The figures were directly hit by poor performance of South Korean export companies due to the trade dispute between the United States and China last year.
Cho Yong-joon, director of Hana Financial Investment’s Research Center, said, “The sharp drop in semiconductor exports starting from the fourth quarter had a huge impact.”
The combined profit of listed firms is highly likely to decline this year again. Samsung Electronics heralded its “earnings shock” last month, aheadofits Q1 earningsrelease this year, saying that the figures would be lower than market expectations.
KOSPI-listed companies grew in size last year but their internal stability became weaker. In short, their sales rose but their profit ratio fell. As performance of semiconductor firms, which took up most of the total, nosedived starting from the beginning of the year because of concerns over the global economic slowdown, overall performance of South Korean companies is forecast to shrink further this year.
The KRX said on April 3 that the combined sales and operating profit of 540 companies listed on the KOSPI with a fiscal year ending December, which submitted consolidated financial statements, came to 1,894.67 trillion won (US$1.67 billion) and 157.67 trillion won (US$138.67 billion), respectively, last year,hitting a record high for two years in a row. Their sales and operating profit grew 4.76 percent and 0.32 percent from the previousall-timehighsof 1,808.62 trillion won (US$1.59 trillion) and 157.18 trillion won (US$138.24 billion) in 2017.
However, the firms’ profit indexes got worse. The net profit amounted to 107.96 trillion won (US$94.95 billion, down 6.72 percent from a year earlier. The ratio of operating gain to sales and theratioofnetprofittosales stood at 8.32 percent and 5.70 percent, respectively, down 0.37 percentage point and 0.70 percentage point.
The net profit of KOSPI-listed companies continued to reach an all-time high until the first half of last year but the growth rate started to slow down from the third quarter. This was because their profitability compared to sales reduced with the worsening business environment in the second half of the year and their last year’s annual net profit decreased with a rise in money market rate caused by a higher benchmark rate in the Untied States and corporate tax rate.
Nearly 62.3 percent of them, or 402, recorded a gain in net profit, while 21.4 percent, or 138, showed a loss. The number of companies whose balance sheets grew from a surplus to a deficit was 61. The figure was two times higher than 31 of them which turned into profit-making.
Theprevailingforecastisthat performance of listed companies will get worse this year as well. There is a growing concern over the economic slowdown in the United States, Europe and China amid the prolonged trade negotiation between the United States and China. Since the semiconductor market seems to continue to be sluggish until the first half of the year, the question is whether it can recover in the second half.