‘Exchange Rate Decline’ Makes Fourth-Quarter Export Value Drop Inevitable... “Impact on Full-Year Earnings Will Be Limited”

[Financial News] The sharp appreciation of the Korean won has raised concerns about declining earnings at exporting companies, but analysts say the impact will be limited on an annual basis.
Kim Gyu-jin, an analyst at NH Investment & Securities, said on the 4th, “The won–U.S. dollar exchange rate fell to 1,359 won the previous day, down 200 won from the second-quarter peak of 1,559 won.” He added, “With the fluctuation reaching 12.8%, companies may be concerned about a decline in earnings when translated into Korean won.”
He added, “For the remaining business days, declining exports resulting from the weaker value of the Korean won could also become a factor behind lower earnings.”
As the exchange rate falls, margins in the transportation and energy industries are expected to rise, while those in healthcare, displays, and consumer goods are projected to decline. In particular, transportation companies such as Korean Air and LOTTE rental have high foreign-currency debt ratios and are expected to benefit from the won’s appreciation.
Kim said, “Because domestic industries have a high export share, the exchange-rate effect in the fourth quarter will be reflected relatively significantly in lower earnings.” He noted, “In particular, semiconductors, semiconductor equipment, and technology hardware and equipment have high export shares, so the decline in earnings caused by the won’s appreciation will be substantial.”
Nevertheless, he assessed, “Because the exchange-rate effect will be reflected only in the fourth quarter, its impact on full-year operating profit is expected to be limited.”

[email protected] Kim Min-ji Reporter