The operating profit margin of South Korean companies subject to external audit hit its highest in the second quarter of this year, according to a report released by the Bank of Korea (BOK) on September 13.
The bank's analysis of corporate performances shows that the ratio of operating profits to total revenue of domestic companies subject to external audit averaged 7.7 percent in the April-June quarter. However, the figure fell to 5.5 percent when key memory chip producers, such as Samsung Electronics Co. and SK Hynix Inc., were excluded.
The BOK studied 3,333 companies subject to external audit according to the law related to external audit on limited companies as they meet the requirement of having more than 12 billion won (US$10.69 million) of assets.
The second-quarter operating profit margin was the highest ever since the bank began compiling the data in 2015.
The operating profit-to-sales ratio for manufacturers stood at 9.5 percent, reaching an all-time high for two consecutive quarters after 8.8 percent in the first quarter this year. This was because manufacturers saw their profitability improve as exports of high value added products, including high performance memory chips and organic light emitting diode (OLEDs), increased.
An official from the BOK said, “Excluding Samsung Electronics and SK Hynix, the ratio of operating profit to revenue for companies in all industries decreased from 7.7 percent to 5.5. percent, while that of manufacturers fell from 9.5 percent to 6 percent.”
On the other hand, the operating profit margin of non-manufacturers slid to 5 percent in the second quarter from 5.3 percent a year earlier. This was largely due to the fact that a steady loss posted by Korea Electric Power Corp. (KEPCO) dragged down the operating profit margin of the electricity and gas sector to -1.4 percent in the second quarter this year from 2.6 percent a year ago.
By type of business, the operating profit-to-sales ratio for large businesses rose from 7.4 percent to 7.8 percent over the same period, while their net operating profit ratio before tax dropped from 8 percent to 7.8 percent. The operating profit margin of small and mid-size companies slightly decreased from 7.4 percent to 7.3 percent, while their net operating profit ratio before tax grew from 6.6 percent to 7.2 percent.
The debt ratio of companies subject to external audit in terms of stability went down to 82.7 percent in the second quarter from 85.4 percent at the end of the previous quarter due to the expansion of capital and payment of dividends caused by the growth of operating profits. In contrast, its level of dependence on loans went up from 21.9 percent to 22.1 percent. The debt ratio of manufacturers, non-manufacturers, large businesses and small and mid-size companies all decreased but the level of dependence on loans all increased except for small and mid-size businesses. The increase in corporate bonds issued by petrochemical companies was to blame. GS Caltex Corp. issued 448.9 billion won (US$399.91 million) worth of corporate bonds during the second quarter, while LG Chem Ltd. issued 655.6 billion won (US$584.05 million), raising the level of dependence on loans.