Hanwha Chemical Lifts Profit Forecast on Higher Prices, Weak Won

Hanwha Chemical Corp., South Korea’s biggest maker of chlorine-alkali chemicals, increased its forecast for operating profit growth this year to as much as 15 percent because of rising prices and a weakening won.

The Seoul-based company earlier aimed to boost operating profit as much as 8 percent from 486 billion won ($447 million) in 2010, Senior Vice President Choi Kyu Dong said yesterday in an interview.

Demand from China and India, the world’s fastest-growing major economies is lifting prices of polyethylene, polyvinyl chloride and other high-value resins used in plastic products. A 10 won drop of the South Korean currency against the dollar will probably inflate operating profit by “billions of won,” Choi said. Hanwha sells about half of its output to China and other Asian nations, Australia and North America, he said.

The company plans to release second-quarter results later this month.

Hanwha dropped 2.9 percent to 37,000 won at the close of trade yesterday in Seoul, paring the stock’s advance this year to 19 percent. The Korea Chemical Product (KOSPCHEM) Index, which includes 88 companies, has risen 8.6 percent this year, compared with a 12 percent drop in the benchmark Kospi index.

Hanwha estimated last year the won would average 1,060 against the dollar in 2011, slipping toward 1,000 by the end of this year. Since the second half, Hanwha changed its forecast to 1,040, Choi said.

“Our concern is how volatile the currency will be,” Choi said. “If the won weakens under our current business and financial structure, the impact won’t be that bad.”

The currency has risen 7.4 percent against the dollar in the past year, the fourth-best performance among Asian currencies tracked by Bloomberg. It dropped 2.8 percent this month, becoming the biggest loser among Asian currencies.

To contact the reporter on this story: Sangim Han in Seoul at sihan@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net

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