Domestic Companies' Q1 Sales Up 17% YoY...Operating Profit Margin Declines for SMEs

[Asia Economy Reporter Seo So-jeong] Although the sales growth of domestic companies in the first quarter of this year narrowed compared to the previous quarter, the growth trend was maintained due to steady demand and rising product prices.

According to the "2022 Q1 Corporate Management Analysis" released by the Bank of Korea on the 16th, the sales of domestic corporations subject to external audits increased by 17% year-on-year in the first quarter of this year. Looking at the sales growth rate compared to the previous quarter, both manufacturing (26.0%→18.6%) and non-manufacturing (23.6%→15.4%) sectors saw a contraction in growth.

By company size, both large enterprises (26.7%→20.1%) and small and medium enterprises (19.5%→7.5%) experienced a reduced growth rate. By detailed industry, the growth in wholesale and retail trade (23.8%→9.4%) and construction (18.8%→4.7%) notably slowed. The total asset growth rate recorded an all-time high at 3.7%, expanding from 3.3% in the same period last year.

The operating profit margin on sales for externally audited companies remained steady at 6.3%, similar to 6.4% in the same period last year, despite rising raw material prices.

By industry, manufacturing (6.7%→8.4%) increased, led by electrical and electronics, machinery (12.4%), and petroleum and chemicals (8.2%), while non-manufacturing (6.1%→4%) declined due to sectors such as electricity and gas (-12.6%). This is interpreted as a result of limited price increases due to frozen electricity rates, while the wholesale price of electricity purchased from power generation companies (cost of sales) surged, worsening profitability.

By size, large enterprises (6.5%→6.6%) saw a slight increase, whereas small and medium enterprises (6.0%→5.3%) declined. Kim Dae-jin, head of the Corporate Statistics Team at the Bank of Korea’s Economic Statistics Bureau, explained, "Small and medium enterprises are more affected by rising raw material prices than large enterprises. Due to increased input costs and differences in market influence and pricing power compared to large companies, their operating profit margins have declined."

Regarding financial stability indicators, the debt ratio rose to 88.1% compared to the previous quarter due to an increase in liabilities that do not involve financial costs such as accounts payable and unpaid dividends, but the dependence on borrowings slightly decreased to 23.9% as assets increased.

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