Last Year Corporate Net Profit Increased by 128%... Record High Growth Rate

Statistics Korea, 2021 Business Activity Survey Results (Provisional)

[Asia Economy Sejong=Reporter Kim Hyewon] Last year, domestic companies in South Korea saw their sales and net profits increase by the largest margin ever. The export boom led to strong performance in manufacturing, while the accommodation and food service industry and arts and sports sectors turned profitable, driving overall results. The proportion of Chinese subsidiaries among overseas affiliates decreased.

According to the "2021 Corporate Activity Survey Results (Preliminary)" released by Statistics Korea on the 15th, the pre-corporate tax net profit (excluding financial and insurance industries) of domestic companies with 50 or more regular employees and capital of 300 million KRW or more was 222.4 trillion KRW, up 127.6% from 97.7 trillion KRW in 2020. This is the highest growth rate since the statistics began in 2006.

As the economy rebounded from COVID-19, companies’ net profits increased significantly. The sales revenue (excluding financial and insurance industries) of these companies last year was 2,760 trillion KRW, a 16.9% increase from the previous year. This is the highest growth rate since the statistics began. The pre-corporate tax net profit per 1,000 KRW of sales was 80.6 KRW, up 39.2 KRW.

By industry, manufacturing net profit accounted for more than half of the total at 143.6 trillion KRW, an increase of 82.1 trillion KRW (133.4%) compared to the previous year. This is attributed to the record-high export value of 644.4 billion USD, which increased by 25.7% last year.

The arts and sports sector, which had posted losses due to the impact of COVID-19, returned to a profit of 1.112 trillion KRW last year. The accommodation and food service industry also turned profitable with 67 billion KRW. However, the pre-corporate tax net profit per 1,000 KRW of sales in accommodation and food services was 2.2 KRW, falling short of the 13.6 KRW recorded before COVID-19 in 2019. The utilities sector’s net profit decreased by 47.8% to 1.744 trillion KRW. The pre-corporate tax net profit per 1,000 KRW of sales also dropped from 59.4 KRW to 26.7 KRW. This is believed to be due to deteriorating profitability caused by rising raw material prices such as oil and natural gas.

The number of employees in domestic companies was 4.916 million, a 4.3% increase from 4.713 million the previous year. Among them, 4.306 million were regular employees.

The number of companies with domestic and overseas subsidiaries increased by 3.1% from 5,823 last year to 6,006. This accounts for 44.7% of all surveyed companies (13,448). Companies with domestic subsidiaries numbered 4,602, up 3.9%, and those with overseas subsidiaries numbered 3,329, up 0.5%.

Regarding the regions where domestic subsidiaries have expanded, China ranked first with 2,495 companies (26.0%), followed by the United States with 1,376 (14.4%), and Vietnam with 1,138 (11.9%). Compared to 2020, the number of subsidiaries in China decreased by 67, while those in the United States (60) and Germany (11) increased. The number of subsidiaries in China has been declining since 2018, likely due to conflicts such as the Terminal High Altitude Area Defense (THAAD) dispute and US-China trade frictions.

Last year, domestic companies’ research and development expenses (excluding financial and insurance industries) amounted to 66.3 trillion KRW, a 10.2% increase from the previous year. Companies that have continuously invested in R&D over the past 16 years had an average sales revenue of 657.9 billion KRW, which is 3.1 times the average sales revenue (211 billion KRW) of all surveyed companies. Companies developing or utilizing technologies related to the 4th Industrial Revolution, such as the Internet of Things and cloud computing, numbered 1,925, an 8.6% increase from 1,773 the previous year.

Last year, 806 companies experienced changes in their main business operations, a 7.5% increase from 750 the previous year. This accounts for 6.0% of the surveyed companies (13,448). Among them, 149 companies relocated their main business sites, 303 companies downsized, and 354 companies expanded. Compared to the previous year, the number of downsizing companies decreased by 9.0%, while relocations (53.6%) and expansions (10.6%) increased. Companies that introduced or operated performance-based compensation management systems such as annual salary systems, performance bonuses, stock option plans, and employee stock ownership plans accounted for 85.7% of all companies, totaling 11,530.

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