Domestic Companies' Growth, Profitability, and Stability All Decline in Q3

Debt Ratio 92.6%... Highest in Over 6 Years

[Asia Economy Reporter Seo So-jeong] Due to factors such as rising raw material prices and a global economic slowdown, the growth, profitability, and stability of domestic companies all deteriorated in the third quarter of this year.

According to the "2022 Q3 Corporate Management Analysis" released by the Bank of Korea on the 15th, the sales of domestic corporations subject to external audits in the third quarter of this year increased by 17.5% compared to the same period last year, showing a slower growth rate than the previous quarter (20.5%).

Kim Dae-jin, head of the Corporate Statistics Team at the Bank of Korea, explained, "Sales are still maintaining an upward trend, but the growth rate has declined due to the global economic slowdown, etc. Operating profit margin also fell compared to the same quarter last year due to the impact of rising raw material prices."

By industry, both manufacturing (22.2%→18.2%) and non-manufacturing (18.2%→16.7%) saw a decrease in growth rates. By company size, large corporations (23.0%→19.0%) experienced a decline in growth rate, while small and medium-sized enterprises (SMEs) (10.2%→11%) showed a slight increase.

The total asset growth rate was 2.8%, down from 3.1% in the same quarter last year. By industry, manufacturing (3.3%→2.4%) saw a decrease in growth rate, but non-manufacturing (2.8%→3.3%) increased. By company size, both large corporations (2.9%→2.7%) and SMEs (3.7%→3.0%) decreased.

The operating profit margin to sales for companies in Q3 was 4.8%, down from 7.5% in the same quarter last year. Manufacturing’s operating profit margin dropped from 9.6% to 5.4%, and non-manufacturing from 5.1% to 4.0%. By company size, large corporations (8.3%→4.7%) declined, but SMEs (5.0%→5.4%) increased. The slight rise in SMEs’ operating profit margin was influenced by improved business conditions in service sectors such as food and lodging following the lifting of social distancing measures.

The pre-tax net profit margin to sales also fell to 5.0% compared to 8.4% in the same quarter last year. The pre-tax net profit margin is a profitability indicator that comprehensively reflects management performance arising not only from business activities but also from financial activities.

The debt ratio rose to 92.6% from 92.1% in the previous quarter. This is the highest level in 6 years and 3 months since Q2 2016 (94.96%). Both manufacturing (70.8%→71.3%) and non-manufacturing (126.7%→129.8%) increased, and by company size, large corporations (87.9%→89.9%) rose, while SMEs (108.3%→106.0%) declined.

The debt dependency ratio, which indicates the proportion of borrowings procured externally out of total capital, recorded 25.2%, also rising from 24.5% in the previous quarter.

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