The number of loss-making listed companies increased a lot in South Korea this year. The number is estimated to hit an all-time high since the Asian financial crisis of 1998.
According to market research firm Korea CXO Institute, a total of 150 companies were in the red in the first half of this year among the top 1,000 South Korean listed companies in terms of sales. For reference, the number was 88 in the first half of last year, 154 in 2014, and 187 in 1998. It was 108 during the IMF bailout in 1997 and 99 during the global financial crisis of 2008.
The 1,000 listed companies’ total operating profit plummeted from 26 trillion won (US$23.4 billion) to 14 trillion won (US$12.6 billion) from 1997 to 1998. Their profit has gradually increased since then and reached an all-time high of 129 trillion won (US$116 billion) last year. Experts, however, point out that this is a kind of illusion based on the recent boom in the global semiconductor industry.
The 1,000 companies’ current net income totaled 65.1 trillion won (US$58.5 billion) in the first half of this year, up 4.7% from a year ago. However, the current net income of the 999 companies other than Samsung Electronics fell from 51.2 trillion won (US$46.0 billion) to 48.6 trillion won (US$43.7 billion) during the same period. This means companies other than semiconductor manufacturers such as Samsung Electronics and SK Hynix are currently facing a very dire situation.
The market research firm predicted that the number of loss-making companies is likely to further increase next year with the semiconductor manufacturers’ business conditions deteriorating due to a decline in memory chip price and the trade war between the United States and China still ongoing. Also, it mentioned interest rate hikes by the Fed, foreign exchange rates and international oil prices as uncertainty factors.