June 04, 2020 13:11
Korean businesses were suffering even before the coronavirus epidemic. Revenue growth has been slowing from 9.9 percent in 2017 to one percent in 2019, and operating profit growth from 7.3 percent to 4.7 percent.
The Bank of Korea on Wednesday said that it analyzed the fiscal health of 25,874 companies subject to external audits and found that their revenues shrank, while operating margins fell to the four-percent range.
At the same time, debt-to-equity ratios and dependency on loans were rising. Companies subject to external audits have assets of more than W12 billion or over W7 billion if they employ more than 300 workers (US$1=W1,218).
Breaking down the companies according to size and sector, major conglomerates' sales growth fell from 4.3 percent to -1.5 percent while small and mid-sized companies' dropped from 3.9 percent to 1.5 percent.
And manufacturers took a harder hit than non-manufacturers. Their sales growth rate plunged from 4.5 percent to -2.3 percent while that of non-manufacturers dropped 3.8 percent to 0.8 percent.
The operating margin also declined more sharply at major conglomerates (from 7.2 percent to 4.6 percent) than at small and mid-sized companies (from 5.6 percent to 5.2 percent).
The proportion of businesses whose interest coverage ratio was less than 100 percent fell to a record-low 34.1 percent. That means one in three businesses in Korea is struggling just to pay the interest on its loans. Some 23.4 percent suffered operating losses.
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