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Korean Businesses Announce Their Global Earnings

Posted April. 16, 2007 03:01,   


Samsung Electronics’ sales revenues, announced on April 13, were 14.39 trillion won for the headquarters and 20.1 trillion won for its global operations, including overseas subsidiaries. The latter figure exceeded 20 trillion won for the first time on the basis of the first quarter, generally considered the firm’s slack season. Against this backdrop, some analyze that the company’s domestic earnings cannot be the grounds for the judgment that it performed poorly in the first quarter.

The earnings announcements of Korea’s global businesses are being globalized, too. As these companies are operating globally, it is widely believed that their headquarters’ earnings are not an accurate indicator of how they are actually faring.

LG Electronics plans to announce both its global earnings and headquarters earnings starting from its first-quarter earnings announcement set for April 19. This disclosure of global earnings was first adopted by the company among all Korean businesses operating in the global market.

LG Electronics has already become so globalized that it has 111 overseas corporations and subsidiaries and 52,824 overseas executives and employees, or 63.8 percent of its entire personnel.

“Products produced by overseas corporations sold well in the fourth quarter of last year (October through December), but we could not add them in our headquarters-based earnings, which we found very deplorable,” said an LG Electronics official.

“Samsung Electronics produces most of its semiconductors domestically, but at the same time it is a global business that manufactures 40 percent of its cell phones, 90 percent of televisions and 70 percent of its consumer electronics goods abroad,” stated an official from Samsung Electronics. “As [the company] is being rapidly globalized, now the tide is in for an announcement of global earnings.”

Accordingly, Samsung Electronics plans to announce its global earnings every quarter starting in 2009.

Hyundai Kia Automotive Group produces as much as 30 percent of its cars in its overseas subsidiaries. At the request of investors, the company is already announcing its sales revenues and number of cars produced on a global basis. It plans to make more of its announcements “global” ones.

Global businesses such as Sony, Intel, Nokia and Motorola—the major competitors of Samsung Electronics and LG Electronics—have already announced their earnings on the basis of their global operations.

For these companies, their headquarters earnings are meaningless as they operate on a global basis.

Last month, the Financial Supervisory Commission (FSC) announced a roadmap that introduces International Financial Reporting Standards (IFRS) and makes it mandatory for firms to announce their global earnings as part of their consolidated financial statements—by 2011 for businesses with over two trillion won in assets and by 2013 for those with assets of less than two trillion won.

“It is projected that domestic businesses’ announcements of their earnings on a global basis will be constantly on the rise,” said an FSC official.

sublime@donga.com changkim@donga.com