Impact of COVID-19... Steady Decline in Profitability of Listed Companies

Operating Profit Down 21.9% in Q2
Travel, Aviation, and Energy Sectors Expected to Post Operating Losses for Second Consecutive Q2

[Asia Economy Reporter Oh Ju-yeon] The earnings estimates for domestic listed companies for the second quarter of this year are steadily being revised downward. Due to the impact of the novel coronavirus infection (COVID-19), the estimates have decreased by more than 1% compared to a month ago. As the profitability of listed companies weakens, the number of companies expected to post operating losses in the second quarter is projected to increase compared to last year.

According to financial information provider FnGuide on the 26th, as COVID-19 has also impacted the real economy, the operating profit of domestic listed companies in the second quarter of this year is analyzed to decrease by 21.9% compared to the same period last year. The operating profit estimates for 262 listed companies, each estimated by three or more securities firms, stand at 25.823 trillion KRW, a sharp decline from 33.0695 trillion KRW in the same period last year.

This figure is 1.7% lower than the estimate from a month ago. The operating profit estimate for the second quarter of this year, predicted at the end of last month, was 26.2812 trillion KRW, expected to decrease by 20.5% compared to the same period last year. However, as the COVID-19 situation has not been resolved, expectations for economic recovery are increasingly delayed, deepening the decline.

Until early March, before the spread of the COVID-19 crisis, operating profit for the second quarter of this year was expected to increase by about 15.9% compared to the same period last year. It was anticipated that the 'bottom' point, delayed since the second half of last year, would turn around significantly starting from the second quarter after the first quarter. However, with the unexpected COVID-19 variable emerging, the bottom point is being postponed again.

Han Dae-hoon, a researcher at SK Securities, stated, "Despite concerns about economic recession and poor corporate performance, the stock market quickly rebounded due to liquidity, but without the development of vaccines or treatments, concerns about COVID-19 will persist," adding, "Economic activity contraction is inevitable."

It is understood that one out of ten listed companies will record operating losses in the second quarter of this year. Among the 262 listed companies, half?134 companies (51.1%)?are expected to see a decrease in operating profit compared to the same period last year, and 25 companies (9.5%) are analyzed to fall into negative operating profit. This is a slight increase from 21 companies (8.0%) in the same period last year. Companies expected to post operating losses for two consecutive years in the second quarter are mainly in industries directly hit by COVID-19. Representative sectors include travel and airlines (5 companies), energy and refining (3 companies), display and related parts (2 companies), shipbuilding (1 company), wholesale and retail (1 company), and media (1 company).

In the airline industry, as there is no sign of resolution to the COVID-19 crisis in the second half of this year, annual operating profit is also expected to remain negative. Asiana Airlines is expected to reduce its annual operating loss from -443.7 billion KRW last year to -398.3 billion KRW this year, Jin Air’s loss is expected to widen from -48.8 billion KRW to -117.6 billion KRW, Jeju Air’s from -32.9 billion KRW to -177.2 billion KRW, and T’way Air’s from -19.2 billion KRW to -120.1 billion KRW, respectively.

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