Downturn
According to the numbers, South Korea's 30 largest business groups saw their profitability plunge to the lowest level since the global financial crisis in 2008.
According to data by Chaebul.com, the combined operating profit of the nation's 30 largest conglomerates by assets, excluding state-owned companies, came to 57.56 trillion won (US$49.34 billion) last year, down 4.3 percent from 60.17 trillion won (US$51.58 billion) in 2008. The figure decreased by as much as 34.8 percent, or 30.69 trillion won (US$26.31 billion), from the peak of 88.25 trillion won (US$75.65 billion) in 2010.
Their operating profits have rapidly decreased in the last four years from 82.39 trillion won (US$70.63 billion) in 2011, 76.16 trillion won (US$65.29 billion) in 2012, 70.4 trillion won (US$60.35 billion) in 2013, to 57.56 trillion won (US$49.34 billion) last year.
The return on the sales ratio also came to 4.3 percent in 2014, as much as 2.4 percent lower than the 6.7 percent of 2008. The figure improved to 7.9 percent in 2010, then tumbled by nearly half in four years.
By group, 16 conglomerates posted decreased profits compared with those in 2008. LG Group saw a drop from 6.61 trillion won (US$5.67 billion) in 2008 to 4.69 trillion won (US$4.02 billion) last year. The POSCO group also reported a decrease from 7.2 trillion won (US$6.17 billion) to 3.12 trillion won (US$2.67 billion). Compared with the figures in 2008, only five groups – Samsung, Hyundai Motor, Hanjin, Booyoung, and Mirae Asset Group – saw an improvement in operating margins. As Hyundai Heavy Industries Group, KT, Hyundai Group, S-Oil, and Dongkuk Steel posted operating losses of 5 percent, 1.1 percent, 0.6 percent, 0.9 percent, and 0.2 percent, respectively, last year, the groups showed negative growth in their operating profit to sales ratios.
The remaining groups’ profitability also worsened. POSCO Group’s business profit rate decreased from 15.9 percent in 2008 to 4.4 percent last year. During the same period, the figures of LG Group and GS Group dropped from 7.8 percent to 4 percent and 3.8 percent to 0.3 percent, respectively. Shinsegae Group also saw the same decrease in operating margins from 9 percent in 2008 to 6.3 percent last year, while Daewoo Shipbuilding & Marine Engineering and LS Group saw the drop from 8.9 percent to 3.1 percent and 6.3 percent to 2.7 percent, respectively.
Although the business profit rates of Samsung Group and Hyundai Motor Group are higher than those of 2008, the figures of both companies are showing a downward trend after hitting the peaks in 2010 and 2011, respectively.
Samsung’s operating profit rate reached 11 percent in 2010, then kept decreasing from 9.7 percent in 2012 and 8.9 percent in 2013 to 6.4 percent last year. For Hyundai Motor Group, the figure also dropped from 8.7 percent in 2011, 7.8 percent in 2012, and 7.2 percent in 2013 to 6.9 percent last year.
Chaebul.com CEO Chung Sun-sup said, “Conglomerates generally enjoyed a boom until 2012 with the government’s measures to intervene in the currency market and boost the domestic market after the 2008 global financial crisis. However, they are unable to get out of slump in the past three to four years due to the weak overseas and domestic demands.”