As macroeconomic variables such as international oil prices and exchange rates fluctuate, the joys and sorrows of major domestic listed companies’ third-quarter earnings forecasts are mixed. As geopolitical risks from the Middle East rise, oil refining stocks that have benefited from a surge in refining margins and airline stocks that have benefited from a rise in the value of the won have seen their eyes rise significantly. On the other hand, soaring energy prices have worsened the performance outlook for the electric utility and petrochemical industries.
According to financial information company FnGuide on the 27th, Samsung Electronics and SK Hynix ranked first and second in listed companies with the biggest improvement in their profit outlook for the new third quarter in the last three months (June 22nd to September 22nd). This is due to the fact that the shipment of memory semiconductors appears solid and the rise in the market price continues. Samsung Electronics’ third-quarter operating profit forecast increased by 5.4742 trillion won to 111.3772 trillion won from 105.903 trillion won three months ago. During the same period, SK Hynix’s operating profit forecast increased by KRW 1.2157 trillion from KRW 76.9134 trillion to KRW 78.1291 trillion.
However, it is predicted that Samsung Electronics’ third-quarter performance will fall below its previous estimates. Amid the sharp rise in the value of the won against the dollar, the rise in general-purpose DRAM prices did not meet market expectations. Samsung Electronics’ quarterly operating profit estimate, compiled monthly, fell from 113.1142 trillion won in August to 111.3772 trillion won in September. This is the first time that Samsung Electronics’ quarterly operating profit estimate has decreased in the past year.
The refinery industry, which is expected to benefit from refining margins, also saw a sharp increase in its third-quarter profit forecast. This is the result of a sharp rise in oil prices as the war between the U.S. and Iran intensified again since July this year. SK Innovation’s third-quarter operating profit estimate more than doubled from 848.6 billion won to 2.187 trillion won in three months. S-Oil’s forecast also nearly doubled from 557.2 billion won to 1.853 trillion won during the same period. In addition, oil refinery holding companies such as HD Hyundai and GS also saw their operating profit estimates increase by KRW 1.983 trillion (54.4%) and KRW 279.3 billion (29.3%) in the third quarter, respectively.
The surge in refining margins due to rising oil prices is behind the surge in earnings forecasts. Recently, supply and demand have continued to disrupt due to geopolitical tensions in the Middle East, leading to a sharp increase in refined products prices that exceed the increase in oil prices.
In Singapore, the benchmark Asia-Pacific region, gasoline prices soared nearly 70 percent from $78.14 a barrel in the second week of June to $131.16 in the second week of September, according to the Korea National Oil Corporation. Kerosene and diesel prices also more than doubled during the same period.
Jeon Yoo-jin, a researcher at iM Securities, said, “The upward pressure on oil prices is getting stronger as the East-West Pipeline and the Strait of Babel Mandev, which were alternative transport routes for Saudi Arabian crude oil, have been hit recently. Currently, the damaged refining facilities account for 10% of global capacity, and there is no place to fill the vacancy, so virtually all of the high oil prices are absorbed and the refining margin is expected to be strengthened for a long time.”
Despite high oil prices, Korean Air’s performance level is clearly upward. This is the result of absorbing fuel surcharges and fare hikes based on the demand for passengers and cargoes, which have solidified the burden of fuel costs due to rising aviation oil prices. In addition, it is expected that the won’s value has soared against the dollar in the third quarter, resulting in large-scale foreign currency valuation gains.
Korean Air’s third-quarter operating profit estimate rose 35.6 percent to 350.3 billion won from 258.4 billion won three months ago. During the same period, sales forecasts increased 5.1 percent to 7.2388 trillion won, and net profit improved sharply from a deficit of 73.7 billion won to 236.7 billion won. Amid the rising demand for tourism by foreigners and rising fares, the excess demand for high-value-added air cargo such as semiconductors is maintaining good performance due to the expansion of global artificial intelligence (AI) investment.
Ahn Do-hyun, a researcher at Hana Securities, said, “There are concerns that the price transfer will be limited as global aviation oil prices reach 190 dollars per barrel,” but added, “The oil price is being transferred faster from air cargo than passengers, and the fourth quarter is the peak air cargo season, so transport companies can hold hegemony for the time being.”
On the other hand, Korea Electric Power Corp. saw its short-term earnings outlook deteriorate significantly as oil prices soared again in the third quarter amid a freeze in electricity prices for the second year. Korea Electric Power Corp.’s third-quarter operating profit estimate plunged more than 1 trillion won to 2.439 trillion won from 3.5799 trillion won in three months.
The petrochemical industry also saw its third-quarter earnings level drop significantly as the cost burden increased. In three months, LG Chem’s third-quarter operating profit estimate fell 62.8% from 512.2 billion won to 1906 billion won, and Lotte Chemical’s expected loss more than tripled as its operating loss estimate increased from 44 billion won to 142.5 billion won. In the first half of this year, products rose due to concerns over supply disruptions caused by the Middle East conflict and recorded a sharp surplus due to the lagging effect of low-cost raw material input, but high raw material costs were reflected in the third quarter. In addition, the overall performance outlook in the chemical sector worsened due to individual negative factors such as the risk of fines from the Fair Trade Commission regarding LG Chem’s price fixing of vinyl chains.
Meanwhile, Samsung SDI showed the steepest improvement in its forecast in three months among listed companies with operating profit estimates of more than 100 billion won in the third quarter. Samsung SDI’s third-quarter operating profit estimate increased more than eight-fold from 14.8 billion won to 125.1 billion won. However, this is interpreted as a one-time factor in receiving about 150 billion won in compensation for the liquidation of the General Motors (GM) joint venture.
[Reporter Moon Ga Young]