Worsening Corporate Performance
South Korean listed companies saw their net profits halved in the second quarter of this year. The companies earned 54 won (US$0.04) in operating profit and 33 won (US$0.03) in net profit on every 1,000 won (US$0.83) worth of sales. Their operating profits and net profits plunged 37.09 percent and 42.95 percent, respectively, in the first half of the year.
The combined sales of 574 KOSPI-listed companies whose fiscal year ended at the end of December, excluding the financial sector, came to 988 trillion won (US$816.19 billion) in the first half, up 0.83 percent from a year earlier, according to data from the Korea Exchange (KRX) and the Korea Listed Companies Association (KLCA) on Aug. 19. However, operating profits fell 37.09 percent to 55.06 trillion won (US$45.48 billion) and net profits dropped 42.95 percent to 37.49 trillion won (US$30.97 billion). The ratio of operating profit to net sales and the ratio of net profit to net sales slid 3.36 percentage points and 2.91 percentage points, respectively, to 5.57 percent and 3.79 percent.
Earnings showed a clear downturn from the beginning of the second quarter. The combined sales in the second quarter increased 1.50 percent on year to 504 trillion won (US$415.67 billion), while the combined operating profit and the net profit decreased 37.43 percent to 27.17 trillion won (US$22.41 billion) and 47.57 percent to 16.58 trillion won (US$13.67 billion), respectively. The operating profit and the net profit had a steeper decline in the second quarter considering the fact that the figures in the first quarter fell 36.88 percent and 38.75 percent, respectively, from the same period last year.
The ratio of operating profit to net sales and the ratio of net profit to net sales in the second quarter stood at 5.39 percent and 3.29 percent, down 0.37 percentage point and 1.03 percentage points, respectively, from the previous quarter. It means that the companies earned only 33 won (US$0.03) out of 54 won (US$0.04) of operating profits on every 1,000 won (US$0.83) worth of sales in the second quarter.
This was because domestic companies which had a high level of dependence on exports, were hit hard by a shrunken volume of international trade caused by an intensifying trade dispute between the United States and China. With the global downturn in the semiconductor industry, Samsung Electronics Co. and SK Hynix Inc., which rank first and second in the KOSPI market in terms of market capitalization, saw their operating profits plunge 55.63 percent and 88.56 percent, respectively, in the second quarter.
Out of the 574 firms, 77 percent, or 442, posted a surplus, while 23 percent, or 132, recorded a deficit. In particular, the number of companies that went into deficit was 55, or 9.58 percent, while that of firms that turned into profit-making was 51, or 8.89 percent. By industry, only three industries – textile and clothing, transportation equipment and machinery – saw a rise in operating profits, while the remaining 14 industries showed a decline. Notably, the operating profits of the electrical electronics industry, which includes semiconductor, dropped 60.88 percent, nonmetallic minerals 45.86 percent, medical precision 43.54 percent, chemicals 39.79 percent, transportation and warehousing 29.67 percent, paper and wood 24.67 percent, construction 15.36 percent, steel and metal 14.74 percent, electricity and gas 11.97 percent and services 11.18 percent, showing a sharp decline.
In the second quarter alone, only six industries – transportation equipment, textile and clothing, machinery, construction, medicine and medical supplies and food and beverage – had an increase in operating profits, while transportation and warehousing saw its operating profits decline a whopping 98.09 percent, electrical electronics 63.17 percent, nonmetallic minerals 50.56 percent, chemicals 42.43 percent, medical precision 40.64 percent, paper and wood 33.23 percent, telecommunications 20.03 percent, services11.17 percent, steel and metal 9.97 percent and distribution 6.42 percent. In addition, the electricity and gas industry continued to show a loss.
Meanwhile, companies listed on the secondary KOSDAQ market posted growth in sales and operating profits in the first half of the year but their net profits decreased. The consolidated sales of 909 KOSDAQ-listed companies whose fiscal year ended at the end of December totaled 89.54 trillion won (US$73.86 billion) in the first half, up 9.06 percent from a year ago, according to data from the KRX and KOSDAQ Listed Companies Association. The operating profit also grew 5.43 percent to 4.77 trillion won (US$3.94 billion). However, the net profit went down by 12.18 percent to 3.18 trillion won (US$2.62 billion). Out of the 909 firms, 585, or 64.36 percent, ran a surplus, while 324, or 35.64 percent, showed a loss.