Kospi-listed firms underperform in Q2 with gloomy H2 forecast

South Korean firms suffered steeper losses in the second quarter as hefty US import tariffs took a toll, fueling fears of a tougher road ahead as the levies are set to bite harder.

The Kospi-listed 636 companies with a December fiscal year posted a combined operating profit of 53.38 trillion won ($38.2 billion) on a consolidated basis for the April-June period, down 4.8% from a year ago, according to Korea Exchange and the Korea Listed Companies Association on Tuesday.

Over the same period, their net profit contracted 8.2% to 39.66 trillion won, while sales added 3.7% to 764.32 trillion won.

This is the first time that Kospi-listed firms’ combined operating profit has retreated year-over-year since 2023.

The Kospi is Korea’s main stock bourse.

BLUE CHIPS FALTER

The poor performance of market bellwether Samsung Electronics Co., with the largest market value, dealt a blow to the overall market.

In the quarter, its operating profit and net profit plunged 55.2% and 48.0% to 4.68 trillion won and 5.12 trillion won, respectively. Sales inched up 0.7% to 74.57 trillion won.

The main drag was 1 trillion won in loss reserves set aside for semiconductor inventories destined for China but barred from export under US sanctions, the company explained.

“The disappointing second-quarter earnings of Samsung Electronics weighed on semiconductor parts suppliers,” said Kim Sung-no, research head at BNK Securities Co.

Other market heavyweights, Hyundai Motor Co. and Kia Corp., were also hit hard by US auto import tariffs, which took effect in April, dragging down overall earnings of listed firms.

Hyundai Motor’s operating profit and net income declined 15.8% and 22.1% to 3.60 trillion won and 3.25 trillion won, respectively, over the same period. Kia’s operating and net profit decreased 24.1% and 23.3%, each.

The US is a vital destination for Korea Inc.’s exports, with Samsung, Hyundai and Kia at the forefront.

TARIFF FALLOUT SPREADS THROUGH CORPORATE KOREA

Like other sectors, the steel industry, another major exporter, was not immune to the pain.

Hit by 50% US levies on steel imports, Korea’s metal industry players saw combined operating and net income fall 32.1% and 46.6% respectively.

In addition, sectors such as paper and wood (-64.3%), non-metallic materials including cement (-53.5%), textiles and apparel (-30.1%) and transportation and warehousing (-29.3%) also reported weak operating profits in the quarter.

On the Kospi200 Index, 35% firms missed market consensus on net profit, outnumbering the 34% that beat market expectations.  

Shipbuilding, defense, finance, entertainment and healthcare sectors, however, fared well.

Hanwha Aerospace Co. reported an operating profit of 864.5 billion won, more than doubling from a year ago, while Hyundai Rotem Co.'s profit surged 88.0% to 257.6 billion won.

Kospi-listed firms’ combined operating profit for the first half added 8.0% on-year to 110.40 trillion won, while sales rose 5.2% to 1,522.46 trillion won, largely thanks to solid earnings in the first quarter.

“In the first half of the year, earnings surprises usually outnumber shocks, but this trend has reversed for the first time in two years since 2023,” said Kim.

“Given that the downturn in 2023 was largely due to the global recession, this year’s second-quarter results are all the more striking.”

GLOOMY OUTLOOK FOR THE SECOND HALF

With many Korean companies falling under the weight of US tariffs, analysts warned that Korean listed firms face a bleak earnings outlook for the rest of this year as the full brunt of US tariffs kicks in from the third quarter.

According to Seoul-based financial information service FnGuide Inc., the combined operating profit of 233 listed firms for the third quarter is estimated at 67.12 trillion won, down 3.9% from the previous forecast three months earlier.  

“Earnings of listed firms in the third quarter are likely to face further downward revisions,” said Yoo Myoung-gan, an analyst at Mirae Asset Securities.

Write to Sung-Mi Shim at smshim@hankyung.com
Sookyung Seo edited this article.