A handful of the biggest earners among Korea's top 100 companies made so much money in the third quarter that they statistically mask poor earnings results among the majority.
Samsung Electronics on Oct. 25 said its third-quarter operating profit totaled W10.16 trillion (US$1=W1,061). The electronics giant became the first Korean company to post more than W10 trillion in quarterly operating profits.
SK Hynix saw third-quarter sales exceed W4 trillion to a record W4.84 trillion.
But Hyundai Heavy Industries, which announced quarterly earnings results on Thursday, posted a net loss of W12.5 billion, slipping into the red for the first time in three quarters. Operating profit at the major shipbuilder also dropped 63 percent on-year to W222.4 billion.
According to a report on the financial health of private businesses from the Bank of Korea to the National Assembly on Thursday, Korea’s 10 largest businesses saw their operating profit rise 18 percent in the first half of this year compared to the same period last year.
But only one-third posted surprise earnings in the third quarter, while most saw their financial health deteriorate.
Lee Jong-woo at I'M Investment and Securities said business earnings were expected to improve for the third quarter because economic growth rose to the one-percent range starting in the second quarter.
But it turns out that only a handful of industries including smartphones are thriving and most are still suffering, he added.
A common phenomenon in recent earnings seasons has been an "optical illusion" caused by soaring profits at Samsung Electronics. Since the giant's profits are so huge, it appears in the statistics as if most listed companies' earnings improve.
But a closer look at the data tells a different story.
Last year, the top 100 listed companies posted a combined net profit of W48.7 trillion, up three percent compared to 2007, just before the global financial crisis. But excluding Samsung, Hyundai and affiliate Kia, profit was only 63 percent of what the remaining 97 companies achieved in 2007.
The BOK said in the report that the noticeable difference in earnings between top-tier companies sends a warning signal -- some unprofitable big businesses could face a cash crunch. The top 10 companies saw their operating profits rise 18 percent but those of the rest fell nine percent.
The ratio of operating profit to net sales among the top 10 giants stood at 6.9 percent and for smaller companies at 6.4 percent even until 2011. But the gap widened this year to 7.8 percent for the top 10 and 4.7 percent for smaller players.