Q3 Corporate Sales Down 3% Year-on-Year... Decline Rate Narrows

[Image source=Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] Due to the impact of the novel coronavirus infection (COVID-19) and other factors, domestic companies' sales in the third quarter decreased by about 3% compared to the same period last year. However, this is somewhat improved compared to the over 10% plunge in the second quarter. Profitability and stability indicators such as operating profit margin and debt ratio also generally improved, supported by the recovery in exports led by semiconductors and automobiles.

According to the Bank of Korea's '2020 3rd Quarter Corporate Business Analysis' statistics released on the 17th, sales of 20,914 externally audited corporate firms (11,300 manufacturing and 9,614 non-manufacturing) in the third quarter decreased by 3.2% compared to the third quarter of last year. Although sales declined for three consecutive quarters following -1.9% in the first quarter and -10.1% in the second quarter, the rate of decrease significantly narrowed.

In particular, manufacturing (-12.7% in Q2 → -1.6% in Q3) and large corporations (-11.3% → -3.6%) showed clear improvement. By detailed industry, sales growth rates compared to the same period last year turned positive in transportation equipment (-17.3% → 2.7%), machinery and electrical/electronics (-1% → 9%), and information and communication (-0.2% → 0.7%), supported by expanded automobile production, increased semiconductor exports, and strong performance of game companies.

Other growth indicators such as the average total asset growth rate (1.9%) also rose compared to 1.1% in the second quarter. Looking at profitability indicators, both operating profit margin to sales (6%) and pre-tax net profit margin to sales (5.6%) exceeded those of the second quarter (5.3% and 5.2%). These levels are also higher than those of the third quarter last year (4.7% and 4.9%). Operating profit margins of machinery and electrical/electronics (4.3% in Q3 last year → 8.7% in Q3 this year), petrochemicals (5.6% → 7%), and electricity and gas (3.9% → 7.8%) rose noticeably.

Financial structure stability also generally improved. The debt ratio (86.8%) and borrowing dependency (25.3%) in the third quarter both decreased compared to the second quarter (87% and 25.5%). The interest coverage ratio, which divides operating profit by interest expenses, rose from 446.95% to 520.75% within one quarter, returning to the level of 395.88% in the third quarter last year.

However, the debt ratio in manufacturing rose slightly from 67.2% in the second quarter to 67.7% in the third quarter. The Bank of Korea explained that this was due to increased short-term borrowings along with accounts receivable as business activities became more active.

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