Following an Earnings Shock in Q2
Global rating agency Moody's has reconfirmed the corporate credit rating of SK Hynix Inc. at “Baa2,” but downgraded its rating outlook from “stable” to “negative.”
This is because SK Hynix suffered a sharp drop in operating profit in the second quarter and Japan decided to control exports to South Korea of key materials used in semiconductor production.
Moody’s said on July 30, “SK Hynix’s net debts shoot up in the first half of this year. Its financial buffer power has weakened and there is uncertainty about its ability to create the free cash flow amid the slowdown of the industry.”
However, it said, “The semiconductor industry is expected to be stable within next year based on major semiconductor companies’ plans to reduce output and a moderate recovery in demand. In this context, SK Hynix’s profits will be stabilized or show a slight growth next year.
Meanwhile, SK Hynix has recently announced that it posted 6.45 trillion won (US$5.46 billion) in sales and 637.60 billion won (US$539.88 million) in operating profit in the second quarter. Its sales and operating profits decreased by 38 percent and 89 percent, respectively, compared to a year ago. In particular, the company is planning to reduce DRAM production and increase its NAND flash wafer input cut from 10 percent in the first quarter to more than 15 percent starting from the fourth quarter.