S. Korea’s top 30 companies’ profitability plunged to levels not seen since the 2008 global financial crisis. Their operating profits and operating margin (the ratio of operating income to total revenue), which had peaked in 2010, continued to trend down, almost halving in four years.
According to the data compiled by local conglomerate tracker Chaebul.com, the combined 2014 operating profit of the top 30 businesses by assets (except state-owned companies) was 57.56 trillion won (USD 49.2 billion) - which is 34.8% (or 30.69 trillion won) lower than 88.25 trillion won in 2010 and 4.3% lower than 60.17 trillion won during the 2018 global financial crisis.
Their combined operating profit had continued to slip in 2011-2013, posting 82.39 trillion won in 2011, 76.16 trillion won in 2012 and 70.4 trillion won in 2013.
Their operating margin stood at 4.3%, 2.4 percentage points lower than 6.7% in 2008. Since it peaked at 7.9% in 2010, it has also continued to slide over the past four years. By company, 16 companies witnessed their operating profits fall below 2008 levels.
LG Group saw its operating profit drop to 4.69 trillion won last year from 6.61 trillion won in 2008 while POSCO Group’s operating profit plummeted to 3.12 trillion won from 7.2 trillion won in 2008.
Only five conglomerates’ operating margins improved compared to 2008: Samsung, Hyundai Motor, Hanjin Shipping, Booyoung Group and Mirae Asset.
The following companies logged operating losses last year, sending their operating margins into negative territory: Hyundai Heavy Industries (-5.0%), KT (-1.1%), Hyundai Group (-0.60%), S-Oil (-0.90%) and Dongkuk Steel (-0.20%).
POSCO Group’s operating margin slumped to 4.4% last year from 15.9 % in 2008. LG Group’s operating margin dwindled to 4.0% from 7.8% while that of GS Group fell to 0.3% from 3.8%.
Shinsegae Group’s operating margin slid to 6.3% last year from 9.0% in 2008; Daewoo Shipbuilding & Marine Engineering’s operating margin fell sharply to 3.1% from 8.9%. LS Group saw its operating margin drop to 2.7% last year from 6.3% in 2008.
After rising to 11.0% in 2010, Samsung’s operating margin continued its downward trajectory, posting 9.7% in 2012, 8.9% in 2013 and 6.4% in 2014. Hyundai Motor Group’s operating margin also continued to contract, logging 8.7% in 2011, 7.8% in 2012, 7.2% in 2013 and 6.9% in 2014.
“In the post-crisis years until 2012, their business had boomed thanks to the government’s business-friendly currency exchange policies and stimulus measures aimed at boosting domestic demand. However, the double whammy of weak exports and sluggish domestic demand over the recent 3 to 4 years has weighed heavily on their profits,” Chaebul.com said.