The combined operating profit of the top 10 companies listed on the benchmark KOSPI market in terms of operating profit plunged 47.3 percent in the first quarter of this year compared to a year earlier. Seven firms, excluding Hyundai Motor Co., Kia Motors Corp. and Hyundai Mobis Co., all saw their operating profit fall from the same period last year.
The combined amount of operating profits from the top 10 KOSPI-listed companies in terms of operating profit came to 14.28 trillion won (US$11.95 billion) in the first quarter of 2019, down 12.82 trillion won (US$10.72 billion) from a year ago, according to the data announced by Korea Exchange (KRX) and the Korea Listed Companies Association (KLCA) on May 17.
Considering the fact that the combined operating profit of 540 firms increased 0.32 percent to 157.18 trillion won (US$131.47 billion) at the annual closing results in 2018 announced in April, it seems that companies’ business performance will get worse. Last year’s annual operating profit dropped 4.73 trillion won (US$3.96 billion), or 4.6 percent, excluding Samsung Electronics which took up most part. Samsung Electronics propped up the results last year, but this year, major conglomerates, including Samsung Electronics, showed a poor performance.
The operating profit of 573 companies fell 16.25 trillion won (US$13.62 billion), or 36.88 percent, to 27.80 trillion won (US$23.26 billion) in the first quarter compared the same period a year earlier, and their financial indexes got worse. The debt rate stood at 112.36 percent at the end of the first quarter, up 6.84 percentage points from 105.552 percent at the end of last year. This is because the total capital grew only 1.54 percent to 1,336.18 trillion won (US$1.12 billion), while the total debt increased 8.12 percent to 1,501.32 trillion won (US$1.26 billion). However, the total operating profit of 910 firms listed on the KOSDAQ market came to 2.12 trillion won (US$1.78 billion), up 3.4 percent from a year ago, showing better performance than KOSPI-listed companies. Experts point out that the present government’s business regulations serve as the barrier of major firms’ business activity and are one of the factors that drag down business performance. The minimum wage system, 52-hour maximum working week and regulation on unfair trade acts are considered main unfavorable factors.
An official from the business community said, “We can’t say that the government’s policy is solely responsible for major companies’ worsening performance. But, it is clear that entrepreneurship has been adversely affected after the present government came to power. Businesses think that it would be better to go abroad as the government has been strengthening regulations in addition to the fact that the home market is small and the domestic economy is slowing down.”