Samsung Electronics` Profit Down 50 Percent

Korean manufacturers had disappointing performances in the first half of 2005.

The net profit of Samsung Electronics, Korea`s largest company in terms of market value, was 3.1929 trillion won in the first half of 2005, a steep decline from the same period last year, when its net profit was 6.2719 trillion won.

According to data released by the Korea Exchange and Korea Listed Companies Association on August 18, the total revenue of 532 companies listed on the Korea Stock Exchange whose fiscal year ended in December was 303.6034 trillion won, a gain of 2.14 percent compared to the same period last year.

Net profit, however, decreased by 11.63 percent to 24.1272 trillion won, along with operating profit, which plunged 19.19 percent to 26.2899 trillion won.

The manufacturing sector`s performance was poor compared to the banking and finance sector.

While manufacturers revenue increased 2.71 percent for the first half of 2005, net profit and operating profit declined 19.90 percent and 27.51 percent, respectively.

The sector`s ratio of operating income to revenue was 8.08 percent, meaning the companies earned 81 won for every 1,000 won in revenue. The ratio was 11.45 percent in the first half of last year.

"The rise of raw material prices, including oil, and the devaluation of the Korean won against the dollar affected the profitability of companies that depend on exports for the revenue," said Lee Soo-hee, the director of corporate research for the Korea Economic Research Institute.

The debt to equity ratio of manufacturers as of June 2005 declined 1.33 points to 90.07 percent from the end of 2004 as companies, unable to find the appropriate place to invest, used most of their profit repaying debt.

The banking industry, on the other hand, was profitable. The overall revenue of the banking sector was 17.9158 trillion won, a fall of 6.22 percent compared to the same period last year. Net profit and operating profit, however, were 2.7828 and 3.2115 trillion won, respectively, up 323.49 percent and 360.08 percent.

The total revenue of 721 companies listed on KOSDAQ was 26.6582 trillion won, increasing 2.83 percent from the same period last year. The companies, however, recorded 921.1 billion in net profit and an operating profit of 1.3746 trillion won, decreasing 22.70 percent and 11.36 percent in the same period.

"Although the exchange rate and oil prices could become negative factors, I believe the overall performance of companies will be better in the second half of 2005," said Hwang Chang-joong, the director of investment strategy for Woori Wealth Management.

Kwang-Hyun Kim Wan-Bae Lee kkh@donga.com roryrery@donga.com