"Refining Industry Turns to Deficit"... Leading Companies' Q1 Earnings Forecasts Downgraded One After Another

Korea National Oil Corporation is conducting 46 overseas oil development projects in 17 countries worldwide. Drilling for oil in the Vietnam concession area

[Asia Economy Reporter Koh Hyung-kwang] The concerns over poor earnings performance of major domestic companies due to the impact of the novel coronavirus infection (COVID-19) are becoming a reality. As the situation shows signs of prolonged duration, there is growing speculation that it will negatively affect companies' annual earnings as well.

According to Infomax, a financial information company, as of the 20th, the operating profit forecast for the first quarter of this year for 46 major KOSPI companies, each of which had earnings forecasts from three or more securities firms within the last three months, stands at 11.3159 trillion won. This is a 16.8% decrease compared to January 20, when the first confirmed case was reported in Korea.

The net profit forecast also dropped by 22.2%, from 10.1333 trillion won to 7.8798 trillion won, and the sales forecast decreased by 3.7%, from 186.5676 trillion won to 179.6829 trillion won.

During this period, the market capitalization of these stocks fell sharply by 26.7%, from 796.8613 trillion won to 583.9751 trillion won. By industry, operating profit forecasts for chemical (-65.6%), steel and metals (-30.5%), transportation and warehousing (-30.4%), and manufacturing (-19.9%) sectors were significantly revised downward over two months, while electronics (-8.4%) and pharmaceuticals (-6.9%) also declined.

By company, Samsung Electronics' operating profit forecast fell by 4.2%, from 6.82 trillion won to 6.513 trillion won as of the 20th, and SK Hynix dropped by 26.7%. Korean Air, which was directly hit by COVID-19, saw its earnings forecast plummet by a staggering 82.6%. Refining companies S-Oil and SK Innovation are expected to record operating losses in the first quarter.

The bigger concern is that the earnings shock may not be limited to the first quarter. Initially, the financial investment industry expected the COVID-19 impact to be confined to the first quarter, with earnings rebounding afterward. However, as the situation prolongs and the economic recovery timeline is delayed, expectations for the annual performance are also declining.

Two months after the outbreak of COVID-19, the annual operating profit forecast for major KOSPI companies stands at 126.0875 trillion won, down 6.6% from two months ago. Researcher Lee Seung-woo of Eugene Investment & Securities said, "With global consumption contraction and the increasing possibility of companies reducing investments, it seems difficult for major domestic companies, including the semiconductor sector, to avoid the shock."

This content was produced with the assistance of AI translation services.