The strike-related production disruption in early May will have little impact on Samsung Biologics' (207940.KS) second-quarter earnings, according to a forecast. The batch disposal costs will be reflected in the third quarter, when revenue is recognized, while the company is expected to meet client delivery schedules through re-production within the year.
According to Korea Investment & Securities on Sunday, Samsung Biologics is forecast to post second-quarter revenue of 1.3096 trillion won and operating profit of 588 billion won on a consolidated basis, in line with market consensus. The batch disposal costs from the partial strike that occurred in early May will be reflected in third-quarter earnings, so the impact on second-quarter results is expected to be limited.
The annual earnings outlook was also maintained. Samsung Biologics presented revenue growth guidance of 15 to 20 percent for this year at BIO USA, and securities firms expect that the production volume lost during the strike can be re-produced within the year, leaving no major issues with the annual revenue target or client delivery schedules.
However, the medium- to long-term profitability burden from rising labor costs, should the labor-management negotiations be concluded, was cited as a variable. The U.S. plant began operations in the second quarter and is expected to start reflecting revenue in earnest from the third quarter.
Large-scale new orders in the second half were assessed as a key variable that could raise Samsung Biologics' corporate value again. "The order volume from existing clients has increased, but no major new contracts have been announced yet," said Wi Hae-joo, a researcher at Korea Investment & Securities. "If the U.S. plant operations and new orders gain momentum, the earnings improvement will continue."
