Hyundai Motor Runs Alone... Samsung and LG Scream Amid Profitability Decline

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[Asia Economy Reporter Hyungsoo Park] Among the four major conglomerates?Samsung, SK, Hyundai Motor, and LG?only Hyundai Motor Group is expected to see an increase in its Q4 operating profit estimates compared to the same period last year. Although all four groups experienced revenue growth, they could not avoid the negative impact on profitability caused by soaring raw material prices and interest rate hikes. In particular, with growing concerns about an economic recession next year, the possibility of deteriorating earnings for these companies cannot be ruled out.

According to FnGuide, a financial information firm, the simple sum of Q4 operating profit estimates for eight Hyundai Motor Group affiliates among the top 100 companies by market capitalization is projected to reach KRW 6.8834 trillion, a 50.3% increase compared to the same period last year. Revenue estimates for the same period are expected to rise by 23.2% to KRW 96.9832 trillion.

The semiconductor shortage for automobiles, which has persisted since last year, has somewhat improved, leading to increased sales and profits for Hyundai Motor and Kia. As Hyundai Motor and Kia achieved strong performances, other affiliates also showed concurrent growth. Sales increased across all eight affiliates, including Hyundai Mobis, Hyundai Glovis, Hyundai AutoEver, and Hyundai Steel. However, Hyundai Steel’s operating profit is expected to decline by about 58% due to sensitivity to rising raw material costs. Amid a sluggish real estate market, Hyundai Construction’s revenue and operating profit forecasts diverged; revenue is expected to increase by 11.0%, but operating profit is projected to decrease by 3.9%.

Among the top 100 companies by market capitalization, Samsung Group affiliates include 11 companies such as Samsung Electronics, Samsung Biologics, and Samsung SDI. Their combined Q4 revenue is estimated at KRW 107.6547 trillion, a 3.8% increase year-on-year. However, due to Samsung Electronics’ underperformance, their total operating profit is expected to decline by 32.6% to KRW 10.1328 trillion.

Unlike Samsung Electronics, Samsung Biologics and Samsung SDI?affiliates that Samsung Group is nurturing as future growth engines in the bio and secondary battery sectors?are expected to more than double their operating profits compared to the same period last year. Samsung Biologics continues its growth trend through steady expansion investments. Geunhee Seo, a researcher at Samsung Securities, explained, "With 100% operation of plants 1, 2, and 3, they have established a profit structure that allows passing costs onto clients," adding, "Their quarterly results consistently exceed market expectations."

Among the top 100 listed companies, SK Group has nine affiliates whose combined Q4 revenue is expected to increase by 21.3% to KRW 71.2958 trillion. However, their total operating profit forecast dropped by 57.0%, largely due to SK Hynix turning to a loss. SK Innovation’s Q4 operating profit estimate is KRW 903.1 billion, more than six times the KRW 126.6 billion recorded in Q4 last year. SK Biopharm’s Q4 revenue is KRW 72.7 billion, a 68.5% decrease year-on-year, marking the largest revenue decline among the four major groups’ affiliates.

LG Group affiliates showed a similar pattern to other groups. The combined estimated revenue of LG affiliates among the top 100 listed companies increased by 19.0% year-on-year, but operating profit decreased by 13.8%. While operating profit estimates rose for LG Energy Solution, LG Innotek, and LG Uplus, LG Display turned to a loss, and LG Electronics and LG Household & Health Care saw declines in operating profit.

Major Companies Strive to Cut Costs... Reviewing Financial Leases

Among the top 100 companies by market capitalization, there are 36 affiliates from the four major groups. Of these, 28 companies saw revenue growth, and 24 companies experienced an increase in operating profit. However, even the four major groups could not prevent profit declines due to worsening profitability. The impact of rising raw material prices and interest rate hikes led to deteriorating profitability.

As profitability worsens, major companies are making every effort to reduce costs. Samsung Electronics, which has entered emergency management, is cutting unnecessary expenses to the extent of turning off half of the corridor lights at major business sites. The key theme of next year’s global strategy meetings for business planning is expected to be overcoming the ‘three highs’?high interest rates, high inflation, and high exchange rates. LG Group has also begun reviewing financial risks, placing financial experts in key positions during the year-end personnel reshuffle.

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