S. Korea firms' profits plunge over Thaad row

SEOUL • South Korea's biggest car and cosmetics makers have suffered a sharp decline in net profits, bearing the brunt of China's wrath over the deployment of a United States missile shield on Korean soil.

Hyundai Motor said its second-quarter net profit plunged 48 per cent year-on-year to 914 billion won (S$1.1 billion), while AmorePacific Corp's net income fell 59.8 per cent to 77.4 billion won from a year earlier.

AmorePacific, which produces popular beauty brands including Sulwhasoo, Laneige and Innisfree, said the domestic economic slump and a drop in Chinese tourists led to its decline in sales and profits.

China has banned Chinese tour groups from South Korea since March, after a diplomatic row over Seoul's decision to deploy the Terminal High Altitude Area Defence (Thaad) anti-missile system to guard against North Korea. Beijing views Thaad as a security threat.

Chinese tourist arrivals to South Korea fell 66 per cent in June from a year earlier, hitting shopping malls and duty-free shops where cosmetics stores maintain a strong presence.

China's retaliation, which includes a ban on K-pop stars, also caused public sentiment to turn against South Korean products, including Hyundai cars.

Hyundai Motor has said it will place top priority on increasing its profits in the second half of the year, with plans including the launch of its first mini sport utility vehicle, the Kona.

Meanwhile, talks to improve and increase air routes linking South Korea, China and Europe have stalled since January due to the Thaad row. This is despite a Korea-China pact last year to set up a task force to tackle the issue.

Chang May Choon

A version of this article appeared in the print edition of The Straits Times on July 28, 2017, with the headline 'S. Korea firms' profits plunge over Thaad row'. Print Edition | Subscribe