Mixed 1Q Results for Korea’s Top 10

Korea’s 10 largest business groups showed an evenly divided performance in the first quarter. About half of them posted growth, while the other half slowed down.

The Korea Exchange announced yesterday that the ten largest groups’ aggregate sales stood at 159.617 trillion won in the first half, a 6.2 percent growth from the corresponding period last year, while their net profit declined 8.4 percent to 9.5071 trillion won.

Five groups, including Hyundai-Kia Automotive Group, LG, Lotte, Hanwha and Doosan, saw their net profits reduced. The net profit of the four groups, except Lotte, whose net profit dropped just 1.9 percent, suffered a considerable 40-to-60-percent decrease in their net profit compared to the same period last year, greatly undermining the aggregate profit of all listed companies.

The LG Group posted particularly poor record.

Having experienced a 78 percent decline in net profit in the first half last year, the group also suffered a 68.6 percent drop this year.

Such dismal performance is largely attributed to the poor record by LG. Philips LCD division. The company reported the record low performance with operating deficit of 320 billion won and net loss of 274 billion won.

Furthermore, net profits of LG group’s main companies, including LG Electronics, LG Chem and LG Petrochem were halved this year again at minus 39.7 percent, minus 45.0 percent and minus 58.5 percent, respectively.

Amid a series of misfortunes, such as investigations of its slush fund, a labor strike and slow domestic demand, Hyundai-Kia Automotive Group also saw its net profit drop as much as 45 percent.

Net profits of Hanwha and Doosan were almost halved due to the sluggishness of their major affiliates.

By contrast, profitability improved in other five groups, including Samsung, SK, GS, Hanjin and Hyundai Heavy Industries.

Despite unfavorable factors, such as the strong won and oil price surge, the Samsung Group boasted the net profit of 3.9736 trillion won in the first half, a 13.4 percent increase from 3.5031 trillion won in the same period last year.

The net profit of Samsung Electronics expanding 6.3 percent, and that of Samsung’s construction and shipbuilding businesses grew as well, including Samsung Corporation (268.5%), Samsung Heavy Industries(213.7%) and Samsung Engineering (68.1%).

The most striking surge in net profit in the period is found in Hyundai Heavy Industries, a whopping 3,419 percent growth to 324.1 billion won from 9.2 billion won last year.

The company explained the improvement by saying, “The large ship order was reflected in sales, starting from the first quarter, and business in sectors other than shipbuilding, including engines and construction equipments, is doing well.”

The SK Group, with SK Corp. and SK Telecom being its two main pillars, posted a steady increase of 8.94 percent in both sales and net profit.

ssoo@donga.com