Among Korean companies, Lotte Chemical is the most vulnerable to the economic turmoil in emerging Asian markets; Lotte Chemical acquired Malaysia’s petrochemical company Titan Chemicals in 2010

2013-08-28 17:38

Lotte Chemical exposed to Asian turmoil

By Kim Rahn
Among Korean companies, Lotte Chemical is the most vulnerable to the economic turmoil in emerging Asian markets, according to market data, Wednesday.
Petrochemical or energy-related companies are generally more exposed to market fluctuations in India, Indonesia and other neighboring Asian countries, as their sales in the countries take up larger portions of their total sales than firms in other industries.There have been concerns that Korean companies may be negatively affected by the recent economic turbulence from the foreign capital outflow that has occurred in these countries, due to fears of the U.S. relaxing its policy on quantitative easing.
According to KB Investment and Securities, for the last four quarters Lotte Chemical had 18.02 percent of its sales from India, Indonesia, Thailand and Malaysia, the largest ratio among Korean firms operating in those countries.
Lotte Chemical acquired Malaysia’s petrochemical company Titan Chemicals in 2010, and has expanded business in the Southeast Asian market based on the takeover.
Most of the company’s sales in the markets were from Malaysia, garnering 14.77 percent, followed by India.
S-Oil was the second most vulnerable to the turmoil. It gained 9.87 percent of its sales from the four countries, including 5.1 percent from Indonesia and 2.12 percent from Thailand.
SK Holdings had 7.07 percent of its sales from the Southeast Asian market, the sixth most vulnerable, while SK Innovation came at eighth with 6.57 percent; and Kumho Petrochemical, at ninth with 6.52 percent.
Among the top 10 companies exposed to the risk, five were petrochemical or energy businesses.
“Their sales may not be greatly affected as of now. However, if those countries come to a financial crisis one by one they may see an economic downturn, and it could deal a serious blow to the firms’ performances because demand there will decrease,” KB researcher Park Se-won said.
Other firms on the top 10 list besides the energy companies include Halla Visteon Climate Control, an auto air-conditioning and heating system provider, which obtained 9.97 percent of its sales from the four countries, ranking third; Daewoo international, 8.59 percent, ranking fourth; Samsung SDI, 7.54 percent, coming at fifth; and Cheil Worldwide, 6.6 percent, at seventh.
By industry, chemical, oil, media, information technology and pharmaceutical businesses had relatively higher vulnerability, while auto and food services had less.
Top five companies in terms of aggregate market value had relatively less risk. Samsung Electronics had 3.5 percent of its sales from the four countries, while Hyundai Motor gained 1.16 percent; POSCO, 1.8 percent; Hyundai Mobis, 0.8 percent; and Kia Motors, 0.2 percent.