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Korean Companies Suffer a Drop in Operating Profit in 6 Years
Hit by a Business Slump
Korean Companies Suffer a Drop in Operating Profit in 6 Years
  • By Michael Herh
  • December 11, 2019, 14:32
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Korean companies suffered a drop in their operating profits in 2018 for the first time since 2012.

Korean companies suffered a drop in their operating profits in 2018 for the first time since relevant data began to be collected in Korea. Their profitability deteriorated due to a slump in Korea’s flagship industries such as construction, shipbuilding, and automobiles. In particular, small and medium-sized Korean companies suffered more than large companies from the economic slump. Large Korean companies, which account for only 0.3 percent of all Korean companies in terms of number, accounted for 64.1 percent of the total operating profits, reflecting the longstanding dominance of large companies in the Korean economy.

Aggregate profits of Korean corporations added up to 284.44 trillion won in 2018, down 2.1 percent from the previous year's 290.6 trillion won, according to the provisional tally released by Statistics Korea on Dec. 10.

This was the first time that Korean companies’ operating profit shrank from the previous year since Statistics Korea began to compile relevant data in 2012.

By company size, it was a tougher year for small and medium-sized enterprises or SMEs than for large corporations. Last year, large enterprises’ operating profit inflated 2.7 percent to 182,223 billion won, while that of small companies and mid-sized companies sank 14.2 percent and 1.5 percent to 62,470 billion won and 39,724 billion won, respectively. As you see, their operating profit declined, but their sales and number of employees rose. As for midsize companies, their number of workers grew 9.2 percent and their sales swelled 11.1 percent. Small companies also recorded a 1.5 percent increase in the number of employees and a 1.8 percent jump in sales. This can mean that their profitability deteriorated that much.

Lopsided profits did not change. The number of large companies stood at 2,236 which is 0.3 percent of 70,756 companies surveyed. The number of mid-sized companies was 4,431, 0.6 percent. But small companies numbered 702,089 which accounted for 99.1 percent of the total. Large companies’ number of employees hit 2,069,000 million, or 20.1 percent of the total while that of mid-sized enterprises 1.37 million, or 13.3 percent. But small companies had 6,834,000 employees which was 66.5 percent. However, large companies’ operating profit accounted for 64.1 percent of the total even though their number of employees accounted for only 0.3 percent of the total.