Soaring exchange rate causes pharma asset value to fluctuate

...Samsung Biologics’ value rises to KRW 112.9 billion and SK Biopharm’s value to KRW 7.8 billion

KRW-dollar exchange rate stays in the KRW 1,430 range in the aftermath of the rejected impeachment vote...disparities exist in company

10% rise in the exchange rate increases non-operating profit and loss by KRW 112.9 billion and KRW 7.8 billion for Samsung Biologics and SK Biopharm, respectively

The sharp rise in the won-dollar exchange rate in the aftermath of the impeachment and martial law has had a significant impact on the asset value of pharmaceutical and biotech companies.

 

Companies with much foreign currency assets held in dollars have shown a significant increase in their asset value due to the high exchange rate, such as Samsung Biologics and SK Biopharm, which have a large share of overseas business.

 

On the other hand, companies with large foreign currency liabilities held in dollars experienced a decrease in asset value due to the rise in the exchange rate.

 

#SB 'High exchange rate' gains for firms with large dollar assets...Samsung Biologics’ asset value rises to KRW 112.9 billion when the exchange rate rises by 10% According to industry sources, the won-dollar exchange rate closed at KRW 1,432.80 on the Seoul foreign exchange market on the 14th, up 1.00 won from the previous trading day.

 

The won-dollar exchange rate has recently remained above KRW 1430 in the aftermath of the declaration of emergency martial law and failed the impeachment vote.

 

In Q3, the average won-dollar exchange rate was KRW 1,358.55.

 

In the 3 months since it has risen to over KRW 1430, an increase of over 5%.

 

Compared to last year, the increase is even greater.

 

In Q4 last year, the average exchange rate was KRW 1321.24, which rose more than 8% in a year.

 

Some analysts predict that if the current turmoil continues, the won-dollar exchange rate could reach KRW 1,500.

 

Changes in the won-dollar exchange rate

The rise in the exchange rate can have a modest impact on the asset value of pharma-bio companies.

 

In particular, companies with a large proportion of overseas business are greatly affected by the exchange rate due to the assets and liabilities they hold in foreign currencies.

 

If the company owns much foreign currency assets in dollars, the asset value will increase due to the rise in the exchange rate, and conversely, if there are many financial liabilities borrowed in dollars, the asset value will decrease.

 

In its latest quarterly report, Samsung Biologics explained that every 10% rise in the won-dollar exchange rate increases its net income before corporate taxes by KRW 112.9 billion.

 

Considering that the current KRW-dollar exchange rate has risen by about 5% compared to the average exchange rate in the third quarter, the time of the quarterly report, it is calculated that the recent rise in the exchange rate has increased the corporate’s asset value by about KRW 50 billion.

 

In the case of SK Biopharmaceuticals, every 10% rise in the exchange rate increases the value of its assets by KRW 7.8 billion.

 

Chong Kun Dang’s asset value increased by KRW 1 billion.

 

The analysis is that companies that own more assets than liabilities held in dollars would show an increase in asset value.

 

#SB Cashable assets of Samsung Biologics, Celltrion, Dong-A ST, increase due to exchange rate fluctuations The rise in exchange rates will especially affect the cash and cashable assets of major pharmaceutical and biotech companies.

 

They have already increased their cash and cash equivalents by hundreds of millions of won to tens of billions of won in the third quarter due to the rise in the exchange rate.

 

If the current high exchange rate continues to the fourth quarter, it is expected that the companies’ cash and cashable assets will increase even further.

 

Samsung Biologics reported cash and cash equivalents of KRW 540.2 billion at the end of the third quarter, an increase of KRW 172.3 billion from the KRW 367.9 billion at the end of the second quarter.

 

The increase in cash and cash equivalents was partly driven by a rise in the exchange rate.

 

The company explained that the effect of foreign exchange rate fluctuations on cash and cash equivalents amounted to KRW 19.9 billion.

 

Approximately 9% of the increase in cash and cash equivalents in the third quarter (KRW 172.3 billion) was attributable to foreign exchange rate changes.

 

During the same period, Celltrion's cash and cash equivalents increased by KRW 408.1 billion, up from KRW 564.6 billion to 972.7 billion, of which KRW 4.1 billion was attributable to foreign exchange rate changes.

 

Dong-A ST's cash and cash equivalents increased from KRW 212.8 billion to KRW 301.3 billion.

 

Of this, the increase in cash and cash equivalents due to exchange rate fluctuations amounted to KRW 700 million.

 

In the case of SK Biopharm, cash and cash equivalents increased from KRW 239.7 billion to KRW 266.0 billion, with the effect of exchange rate fluctuations amounting to nearly KRW 200 million.

 

In the case of Chong Kun Dang, Hanmi Pharmaceutical, and Daewoong Pharmaceutical, the companies’ cash and cash equivalents decreased in the third quarter compared to the second quarter, but cash and cash equivalents ultimately increased due to the effect of exchange rate changes.

 

Exchange rate changes partially offset the decrease in cash and cash equivalents.

 

At Chong Kun Dang, cash and cash equivalents decreased from KRW 219.6 billion at the end of the second quarter to KRW 203.1 billion at the end of the third quarter.

 

However, it increased by KRW 1.3 billion due to exchange rate changes.

 

If the exchange rate had not risen, the decrease in cash and cash equivalents would have been even greater.

 

Hanmi Pharmaceutical's cash and cash equivalents decreased from KRW 55 billion to KRW 48.2 billion.

 

However, it increased by KRW 1.6 billion due to the effect of exchange rate fluctuations.

 

Daewoong Pharmaceutical saw a decrease in cash and cash equivalents from KRW 111.5 billion to KRW 94.6 billion, with an increase of KRW 1.1 billion due to the effect of exchange rate changes.

 

If the current high exchange rate continues, the effect of the exchange rate fluctuations is expected to contribute more significantly to the overall increase in cash and cash equivalents of corporations.

 

At Yuhan Corp, cash and cash equivalents decreased from KRW 299.3 billion at the end of the second quarter to KRW 229.9 billion at the end of the third quarter, with a decrease of KRW 500 million in cash and cash equivalents due to exchange rate fluctuations over the same period.

 

The decrease in cash and cash equivalents is attributed to the exchange rate rise, as the companies had more financial liabilities in dollars than financial assets.