Securities firms forecast that Korea Zinc will post operating profit close to 600 billion won in the second quarter this year. Although the rally in silver prices that buoyed first-quarter results has slowed, analysts said higher zinc and copper prices and a stronger won-dollar exchange rate likely supported earnings.
According to the industry on the 28th, securities firms that recently issued second-quarter outlooks for Korea Zinc estimated operating profit on a consolidation basis at 560 billion to 600 billion won. Shinhan Investment & Securities projected sales of 6.0025 trillion won and operating profit of 597.7 billion won. Those figures are up 56.9% and 130.9%, respectively, from a year earlier. Meritz Securities expected operating profit to come in at 563.6 billion won, up 117.7% year over year.
The securities industry cited higher zinc and copper prices and the exchange-rate effect as the main drivers of improved results. According to Shinhan Investment & Securities, second-quarter zinc prices rose 7.1% from the prior quarter, while copper prices climbed 3.8%. Over the same period, the won-dollar exchange rate also increased 1.9%.
Park Kwang-rae, a research fellow at Shinhan Investment & Securities, said, "The spike in silver prices and the positive pricing-cost lag effect that drove strong first-quarter results will weaken in the second quarter," but added, "Rises in zinc and copper prices, a higher won-dollar exchange rate, improved sulfuric acid profitability, and stabilized results at SMC and Pedal Point are expected to offset much of the earnings decline in the precious metals sector."
Jang Jae-hyeok, an analyst at Meritz Securities, said, "Quarter-over-quarter gains in gold and silver prices have slowed, but the strength in zinc prices and the won-dollar exchange rate offset that," adding, "We are positive as results at subsidiaries such as SMC and Pedal Point are also stabilizing."
Expanded copper sales also likely supported earnings. Shinhan Investment & Securities estimated Korea Zinc's second-quarter copper sales volume at 15,700 tons, up 107% from the previous quarter. It forecast copper revenue to surge from 108 billion won in the second quarter of last year to 307 billion won in the second quarter this year, about a threefold increase.
Profitability of byproducts and overseas subsidiaries was also seen improving. Shinhan Investment & Securities estimated that the gross margin of semiconductor-use sulfuric acid, which had been around 2% to 3% in the past, rose to about 10% in the first half of this year. It assessed that results at Australian smelting subsidiary SMC and U.S. electronic waste recycling subsidiary Pedal Point have entered a stabilization phase.
Full-year results were also projected to rise sharply. Shinhan Investment & Securities expected Korea Zinc's sales this year to reach 24.0041 trillion won and operating profit to 2.4854 trillion won, up 44.7% and 101.7%, respectively, from last year.
As a mid- to long-term variable, the Tennessee integrated smelter construction project, "Project Crucible," was cited. Shinhan Investment & Securities estimated that if the U.S. Smelter reaches full operation, it could generate more than 1 trillion won in earnings before interest, taxes, depreciation and amortization (EBITDA) annually.
Shinhan Investment & Securities lowered its target price for Korea Zinc to 1.6 million won, reflecting valuation methodology and adjustments to 2027 earnings estimates, but maintained a "buy" rating.