[Asia Economy Reporter Ki-min Lee] The first-quarter earnings of general trading companies, which experienced a recession due to the COVID-19 pandemic last year, are expected to increase somewhat as the global economy enters a recovery phase. These companies are expanding their businesses into areas such as eco-friendly sectors to find new long-term revenue sources beyond traditional trading.
According to the industry on the 17th, LG Corporation posted sales of 3.6852 trillion KRW and an operating profit of 113.3 billion KRW in the first quarter of this year, up 50.4% and 127.1% respectively compared to the same period last year. The increase in sales at Pantos, LG Corporation’s logistics subsidiary, and strong raw material trading appear to have influenced the performance.
Accordingly, the financial investment sector is analyzing that the performance of general trading companies such as Samsung C&T and POSCO International has also escaped the impact of COVID-19. According to financial information provider FnGuide, the financial investment sector forecasts that Samsung C&T will achieve first-quarter sales of 3.88 trillion KRW and an operating profit of 33 billion KRW in its trading division this year. These figures represent increases of 22.86% and 47.48% respectively compared to the same period last year. The industry expects significant improvement in performance due to recent rises in raw material prices such as copper and increased trading volumes.
POSCO International, which operates gas fields in Myanmar, is somewhat affected by the civil war in the first quarter but is expected to defend its performance through strong results in its trading division and electric vehicle parts business. The financial investment sector expects POSCO International’s first-quarter sales to increase by 5.10% year-on-year to 5.7923 trillion KRW, while operating profit is expected to decrease by 12.79% to 127.2 billion KRW. Although profits improved due to rising steel prices, expanded trade margins, and growth in the electric vehicle drive motor core business, the gas fields are expected to be impacted by the Myanmar civil war.
General trading companies plan to maximize profits this year by expanding into eco-friendly and food-related business areas. POSCO International has set a quantitative goal to increase grain handling volume from the current 8 million tons to 25 million tons by 2030, aiming to achieve related sales of 10 trillion KRW. LG Corporation also plans to strengthen profitability and market responsiveness through maximizing management efficiency and advancing business structure starting this year, securing new growth engines centered on secondary batteries, healthcare, and eco-friendly sectors.
Hyundai Corporation, formerly Hyundai Trading Company, changed its name last month and is transforming from a trading-focused company into a comprehensive business partner. Hyundai Corporation has been developing aluminum forged parts for vehicles and operating a joint factory, starting mass production since last year. It has also entered the solar power plant business, currently operating six plants domestically and two in Japan. Through its holding company, Hyundai Corporation Holdings, it is also pursuing food and beverage businesses. An industry insider said, "General trading companies that used to focus on trading are entering various businesses to find stable sources of revenue."
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