Operating Profit '1 Trillion Won Club' Plummets... Is the Growth Engine Fading?

[Asia Economy Reporter Koh Hyung-kwang] The number of companies expected to have operating profits exceeding 1 trillion won last year has decreased by nearly 20% compared to the previous year. No new companies joined the operating profit "1 Trillion Club." It is evaluated that companies that should serve as growth engines for South Korea struggled due to the global economic slowdown and uncertainties.

On the 6th, financial information firm FnGuide aggregated earnings estimates presented by securities firms, revealing that a total of 27 listed companies are expected to record operating profits of over 1 trillion won last year. Leading Korean companies such as Samsung Electronics, SK Hynix, and Hyundai Motor, as well as representative heavy chemical industry companies like POSCO, LG Chem, and Lotte Chemical, made it into the operating profit 1 Trillion Club.

The operating profit 1 Trillion Club is a challenging milestone achieved by only about 20 to 30 companies among approximately 2,200 listed companies in Korea. For companies, it is significant as it recognizes their value as genuine large corporations by solidifying both external growth and internal stability.

Compared to 2018, when 33 listed companies surpassed 1 trillion won in operating profit, the number decreased by 6 companies (18%). The number of companies with operating profits over 1 trillion won gradually increased from 24 in 2014 to 28 in 2015 and 33 in 2016. It slightly dipped to 31 in 2017 but quickly recovered to 33 in 2018. However, last year, it fell below 30, marking a relatively significant decline. Companies that were part of the 1 Trillion Club but dropped out last year include Hyundai Steel, Daewoo Shipbuilding & Marine Engineering, Samsung Life Insurance, Samsung Fire & Marine Insurance, Samsung C&T, GS Engineering & Construction, and Samsung Electro-Mechanics.

Among the 1 Trillion Club companies, 14 saw an increase in operating profit compared to the previous year, while 12 experienced a decrease. The top three companies with the highest operating profit growth rates were Kia Motors (69.8%), Hyundai Motor (46.6%), and Hyundai Mobis (16.9%), sweeping the top spots within the Hyundai Motor Group. This improvement is attributed to strong new car sales. Following them were KT&G (13.9%), Shinhan Financial Group (13.4%), and LG Household & Health Care (13.1%).

Conversely, the companies with the largest decreases in operating profit were SK Hynix and Samsung Electronics, with expected declines of 85.9% and 53.9%, respectively, compared to the previous year. This reflects the impact of the semiconductor market downturn. Heavy chemical companies also saw significant decreases, including LG Chem (-40.2%), Lotte Chemical (-28.0%), SK Innovation (-27.2%), and POSCO (-23.9%).

Except for Woori Financial Group (operating profit of 2.8656 trillion won), which was launched last January to transition to a holding company system, no new companies joined the operating profit 1 Trillion Club last year. This contrasts with 2018, when five companies?Samsung C&T, GS Engineering & Construction, LG Household & Health Care, Samsung Electro-Mechanics, and Doosan Heavy Industries & Construction?were newly added. Kim Hyung-ryul, head of the Kyobo Securities Research Center, diagnosed, "Due to the global economic slowdown and domestic and international uncertainties, the performance of South Korea's leading companies is increasingly declining."

This content was produced with the assistance of AI translation services.