Samsung Biologics' (207940.KS) earnings estimates are likely to be lowered due to the impact of a labor union strike, according to an analysis.
"Contrary to initial expectations, the Samsung Biologics union has staged a full-scale strike, which is affecting second-quarter earnings," Heo Hye-min, an analyst at Kiwoom Securities, said in a report Friday. It marks the first strike since Samsung Biologics was founded in 2011. The company estimates that the full-scale strike held from the 1st to the 5th of this month, combined with earlier partial strikes, has resulted in about 150 billion won in lost revenue so far.
"While the amount does not immediately affect operating profit, it is expected to impact operating profit as well, given its effect on revenue," Heo said. "If the issue is not resolved quickly, the impact on second-quarter earnings will grow even larger."
She added, "In the second quarter, results will fall below estimates as the strike impact and retroactively applied wage increases are reflected. The consensus estimate for Samsung Biologics' second-quarter earnings was 1.2924 trillion won in revenue and 598.3 billion won in operating profit, but a downward revision is needed because the strike impact has not been factored in."
She also stressed, "Foreign media coverage of the Samsung Biologics union strike continues, so it will act as an obstacle not only to earnings but also to securing orders from big pharma. Uncertainty needs to be removed through prompt negotiations."
