Stock prices of South Korean paint makers have been tanking amid growing concerns over their earnings outlook as their major customers carmakers and shipbuilders have been grappling with sluggish demand at home and worldwide.

KCC Corp., the country’s largest producer of building and industrial materials, closed its Jan. 20 session down 1 percent at 343,500 won, a three-year low following a five-day losing streak last week. Its stock value has more than halved from 740,000 won tallied in October 2014. The company accounted for 35 percent of the Korean paint market at the end of September last year.

Samhwa Paints Co., the second-largest paint maker in Korea, saw its stock price plummet to the 9,000 won range last week, the lowest level since September 2013. It has lost about 65 percent compared to just six months ago. Noroo Paint Coatings Co., the industry’s third player, hit a fresh 52-week low of 8,280 won on Friday. The dismal situation is no surprise to other smaller paint makers.

The growth outlook for the local paint industry becomes more uncertain as the automobile and shipbuilding industries, the largest customer group of paints and coats, have been reducing their orders amid softening demand. In the car industry, a steady inflow of imported cars and work stoppages at Hyundai Motor Co. due to lengthy labor strikes in the third quarter ended September last year have dented sales of domestic paint makers, according to market analysts.

In the shipbuilding industry, new orders for offshore plants have fallen due to a slow economic recovery in Europe and a decline in crude oil prices. Sales from KCC paints for containers and pre-coated metals plunged from 52.7 billion won ($45.13 million) in 2014 to 32.0 billion won at the end of last September.

A shift in market trends from plastic to metal for smartphone cases, lucrative leads for domestic paint makers, has been also detrimental. Hit by lackluster demand from the electronic and steel industries, Samhwa Paints’ 2016 operating profit slid 40.4 percent to 18.9 billion won on a consolidated basis from a year ago. Revenue and net profit fell 4.9 percent and 44.6 percent, respectively, in the same period. Sales have been hit by a slow growth of the front-end industries and fiercer competition, and profits have shrunken following increased investments for product diversification and other measures for market expansion, an unnamed official at the company said.

Against this backdrop, institutional investors have been racing to sell out paint stocks. The sell-off of KCC shares by institutional investors reached about 160,000 shares for the recent three months. Korea’s biggest institutional investor National Pension Service has sold 50,000 KCC shares over during the final quarter, cutting its stake from 11 percent to 10 percent. Institutional investors have dumped about 560,000 Samhwa Paints shares over the same period.

At 2:47 p.m. on Monday, KCC shares were down 1 percent at 339,500 won from Friday. Samhwa Paints fell 0.6 percent to 9,040 won, while Noroo Paint Coatings dropped 1.1 percent to 8,190 won.

By Lee Yong-gun

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]