SME COVID-19 Polarization... Healthcare and Games 'Soar' Amid Life-or-Death Struggles

Woori Financial Research Institute Analyzes Performance of 620 Listed SMEs
Healthcare and Communication Services Benefit from COVID-19
Heavy Chemical and Consumer Goods See Consecutive Sales Declines

[Asia Economy Reporter Kim Hyo-jin] LabGenomics, a manufacturer of in vitro diagnostic medical devices for immune diagnostics, saw its sales in the second quarter of this year soar by 479% compared to the same period last year. This significant improvement in profitability is the result of a global increase in demand for South Korea's bio technology and products, known as 'K-quarantine,' amid the COVID-19 pandemic. Bioneer, operating in the same industry, also experienced a 435% surge in sales during this period. In contrast, small cell base station manufacturers Innowireless and Wooriro saw their sales decline by 40% and 14%, respectively, due to delays in overseas 5G facility investments caused by COVID-19.

Amid the aftermath of COVID-19, many domestic small and medium-sized enterprises (SMEs) are struggling for survival, with significant polarization and differentiation across industries. While profitability in sectors such as consumer discretionary, materials, and industrials has deteriorated, industries like healthcare and communication services have thrived due to the pandemic's positive spillover effects.

On the 11th, Woori Financial Management Research Institute analyzed the second-quarter performance of 620 non-financial listed SMEs with sales under 100 billion KRW. The combined sales amounted to 7.7 trillion KRW, with an operating profit of 294.3 billion KRW. The average sales per company were 12.5 billion KRW, and the average operating profit was 480 million KRW. The overall sales growth rate increased by 3.7%, up 2.5 percentage points from the same period last year, and the operating profit margin reached 3.8%, the highest level in 11 quarters.

The industries that benefited the most during the COVID-19 situation were healthcare and communication services. Healthcare escaped from operating losses that had persisted for 11 quarters (from Q4 2017 to Q1 2020), and the communication services sector recorded an all-time high operating profit margin of 9.6%. Seong Ji-young, a senior researcher at Woori Financial Management Research Institute, analyzed, "The demand increase for COVID-19 diagnostic kits greatly improved the performance of the healthcare sector, and the increased time spent at home enhanced the growth potential of communication services, including gaming."

Industry Disparities Expected to Persist Amid Continued COVID-19 Impact
"Risk Management and Active Support Must Go Hand in Hand"

Conversely, traditional heavy chemical industries and consumer discretionary sectors continue to underperform. During the same period, the operating profit margin of the telecommunications equipment sector was 2.0%, down 1.1 percentage points from the previous year, consumer discretionary was -1.3%, down 0.1 percentage points, and materials dropped to 0.6%, down 3.7 percentage points. The handset sector fell sharply to -21.7%, a decrease of 22.4 percentage points from the previous year.

The institute forecasted, "With the reinforcement of COVID-19 prevention measures resumed last month, consumer discretionary and traditional heavy chemical industries are likely to continue experiencing poor performance." Meanwhile, healthcare and IT components and equipment sectors are expected to maintain growth due to the ongoing impact of COVID-19, sustaining the performance gap among industries. Accordingly, the institute recommended that risk management for underperforming sectors and proactive support for companies with high growth potential should be pursued simultaneously.

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