Stronger won clouds earnings outlook for Korean exporters

South Korean exporters are facing weaker earnings forecasts as the won’s 10.5 percent appreciation against the U.S. dollar over the past three months weighs on profitability.

An analysis by financial data provider FnGuide commissioned by Maeil Business on Thursday found that 124 of 265 listed companies with operating profit estimates from at least three brokerages had their consensus forecasts for this year lowered between July 20 and October 20, representing 46.8 percent of the companies surveyed. For next year, forecasts were cut for 133 of 258 companies, or 51.6 percent.

By sector, operating profit forecasts for this year were lowered for all automotive and electric power companies covered by the analysis.

Forecasts were also cut for 80 percent of internet service companies, 77.8 percent of media companies, and 75 percent of companies in both game software and hotels and leisure. The figures were 61.5 percent for chemical companies and 57.1 percent for electronic equipment and instrument makers.

The stronger won has weighed on earnings forecasts, particularly for exporters. The currency appreciated 10.5 percent against the dollar, from 1,478.4 won per dollar on July 20 to 1,322.9 won on October 20, reducing the value of overseas revenue.

Operating profit forecasts for Korea’s major automakers have fallen sharply.

Consensus estimates for Hyundai Motor Co. and Kia Corp.’s operating profits this year were lowered by 10.8 percent and 6.1 percent, respectively. Hyundai Motor’s revenue was cut by 3.4 percent, while Kia’s rose 1.1 percent. Higher raw material and component costs have added to the pressure on profitability.

Defense companies with high export exposure have also seen earnings forecasts fall.

Hyundai Rotem Co.’s consensus operating profit estimate dropped 13.9 percent over the three months to 994.6 billion won ($749.68 million) from 1.16 trillion won. Korea Aerospace Industries Ltd.’s estimate fell 24.8 percent to 341.8 billion won from 454.7 billion won. Hanwha Aerospace Co. was an exception, with its earnings estimate revised upward.

In semiconductors, consensus operating profit estimates for major exporters Samsung Electronics Co. and SK hynix Inc. fell 2.5 percent and 3.8 percent, respectively.

Estimates for semiconductor inspection equipment makers GigaVis Co. and TSE Co., however, rose 27.3 percent and 14.1 percent, respectively, as increased investment related to artificial intelligence offset currency-related pressure.

Stronger global demand has also helped offset the stronger won in some sectors, including cosmetics.

Cosmax Inc.’s consensus operating profit estimate rose 15.1 percent to 268.4 billion won from 233.2 billion won. Estimates for Kolmar Korea Co. and Amorepacific Corp. increased 11.3 percent and 5.5 percent, respectively, amid expectations for higher overseas orders, increased production and improved factory utilization.

The stronger won has not translated into better earnings forecasts across all industries that rely on imported raw materials. In petrochemicals, Lotte Chemical Corp.’s consensus forecast for this year shifted from an operating profit of 177.9 billion won to an operating loss of 107.5 billion won, while LG Chem Ltd.’s estimate fell 3.8 percent.

Refiners have seen the opposite trend.

Consensus operating profit estimates for SK innovation Co. and S-Oil Corp. rose 93 percent and 28.9 percent, respectively.