Q2 Corporate Growth and Profitability Deteriorate... Sales Growth Rate Turns Negative to -4.3%

Bank of Korea, Corporate Management Analysis
Sales Growth Rate Lowest Since Q2 2020

The growth and profitability of corporations subject to external audits (external audit corporations) deteriorated in the second quarter of this year, continuing the trend from the first quarter. This was due to a slowdown in global growth, delayed recovery in the IT sector, which caused a decline in sales growth rate, and a drop in semiconductor prices, which weakened profitability.

According to the corporate management analysis results announced by the Bank of Korea on the 12th, the sales growth rate of external audit corporations in the second quarter was -4.3%, a decline from the previous quarter's 0.4%.

Lee Seonghwan, head of the Corporate Statistics Team at the Bank of Korea's Economic Statistics Bureau, explained, "The sales growth rate, an indicator of growth, recorded negative figures for eight consecutive quarters from the first quarter of 2019 to the fourth quarter of 2020," adding, "The -4.3% sales growth rate in the second quarter is the lowest since the second quarter of 2020 (-10.10%)."

By industry, manufacturing (-2.1%→-6.9%) saw a decrease in growth rate mainly in petrochemicals (-17.1%) and machinery & electrical electronics (-15.4%). In petrochemicals, the export value declined more sharply than the previous quarter (-3.5%) due to capacity expansions by major producing countries and reduced demand from the global growth slowdown. Machinery & electrical electronics experienced a decrease in growth rate as semiconductor exports fell amid sluggish IT market conditions and weak server demand.

Non-manufacturing (3.6%→-0.7%) also saw declines in growth rates in sectors such as electricity and gas (10.0%) and transportation (-14.8%). The electricity and gas sector's growth slowed due to a base effect from the previous year's sales increase, while the transportation sector's decline widened due to decreased sales caused by a drop in the Shanghai Containerized Freight Index.

By company size, large corporations (0.7%→-4.8%) turned negative, and small and medium-sized enterprises (SMEs) (-1.2%→-2.0%) also decreased.

The total asset growth rate was 1.1%, down from 2.3% in the same quarter last year.

Operating Profit Margin Halved to 3.6%

Regarding profitability, the operating profit margin of external audit corporations was 3.6%, significantly lower than 7.1% in the same quarter last year.

Manufacturing (8.6%→2.9%) declined due to machinery & electrical electronics (-1.6%), and non-manufacturing (5.1%→4.6%) fell influenced by transportation (8.7%) and construction (3.3%). In machinery & electrical electronics, losses from inventory asset revaluation occurred due to falling semiconductor prices, while transportation's profitability deteriorated due to decreased sales from lower shipping rates. Construction saw a decline due to large operating losses from reconstruction after construction site collapses.

By size, the decline was greater in large corporations (7.4%→3.3%) than in SMEs (5.8%→5.0%).

The pre-tax net profit margin was 6.0%, down from 7.2% in the same quarter last year.

The debt ratio, indicating the stability of external audit corporations, decreased to 90.8% from 95.0% in the previous quarter.

Both manufacturing (72.9%→69.1%) and non-manufacturing (132.9%→131.9%) sectors saw declines, and by company size, large corporations (92.6%→86.8%) decreased, while SMEs (106.6%→110.8%) increased.

The dependence on borrowings remained steady at 26.0%, the same as the previous quarter.

The Bank of Korea estimated these figures based on a sample survey of 3,979 companies out of 22,962 external audit corporations, excluding those meeting specific conditions as of the end of 2022.

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