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By Choi Sung-jin
In 2010, Korean businesses' sales rose 15 percent from the previous year, but comparable sales growth slowed to 0.3 percent last year, Bank of Korea data showed Sunday.
Given corporate turnover is a key factor that directly leads economic growth and exerts heavy influence on public lives in terms of employment, income and consumption, its shrinkage is a problem never to be taken lightly, experts say.
According to the central bank's analysis of the business performances of 574,851 commercial enterprises except for financial companies, sales growth last year stopped at a mere 0.3 percent from 2014, the lowest level since the BOK began to collect related data in 2002. Corporate sales growth fell from 2.1 percent in 2013 to 1.3 percent in 2014.
The low sales increase was due to the sluggish performance of the nation's 130,748 manufacturing firms. Manufacturers' turnover dropped 3 percent in 2015, following the 1.6 percent fall in 2014.
In particular, large manufacturing companies' yearly sales increase rate fell sharply, from -0.4 percent in 2014 to -4.7 percent last year. By industry, petrochemical sector's turnover plunged 15.2 percent and metal products sank 6.8 percent.
Sales of 444,103 non-manufacturing firms grew 3.4 percent last year, down 0.7 of a percentage point from the 4.1 percent increase in 2014. By industry, the turnovers of real estate and rental businesses jumped 23.2 percent thanks to the prolonged property boom amid low interest rates while electricity and gas business dived 10.8 percent hit by lower gas prices and other unfavorable factors.
The sluggish sales growth notwithstanding, corporate profitability improved somewhat thanks to lower commodity prices, including crude oil, the BOK report said.
The ratio of operating profits against sales registered by entire businesses stood at 4.7 percent last year, up slightly from 4 percent in 2014.
However, one in every three companies with debt was unable to repay interest from profit. In 2015, the number of businesses that showed the interest coverage rate _ the rate of operating profits against interest costs _ of lower than 100 percent totaled about 86,700, or 31.5 percent of the total. Those that recorded an operating deficit with interest coverage rate of lower than 0 percent represented 26.6 percent of the total.
Meanwhile, a separate but related report shows half of the nation's 30 largest businesses recorded minus sales growth in the first three quarters of this year.
Companies engaging in key export industries such as electronics, automobiles and steel, showed a particularly sluggish turnover increase. One in four large enterprises recorded "recession-driven surplus" _ producing profits not by sales increases but by strong restructuring and cost cuts.
According to the analysis of sales of 30 largest companies by Chaebul.com, a provider of information concerning family-controlled conglomerates and other large businesses, the 2015 sales of 15 out of the 30 largest companies dropped from 2014. Operating profits also fell at 13 of them, and six suffered falls in sales and profits.
Samsung Electronics' sales in the first nine months totaled 148.53 trillion won ($129.94 billion), up 0.8 percent from a year earlier. Its operating profit fell 1.2 percent to 20.02 trillion won, adversely affected by its Galaxy Note 9 phablet fiasco.
Hyundai Motor's sales rose 2.9 percent, but its operating profit plunged 13.8 percent, to 4.17 trillion won. On the other hand, POSCO's profit jumped 14.6 percent to 2.37 trillion won, but sales tumbled 14 percent, a result of massive restructuring of its subsidiaries and drastic cost cuts. SK Innovation and S-Oil, Korea's largest and third-largest oil refineries, also suffered sales plunges of 21.5 percent and 15.6 percent, respectively.
As the expansion of corporate turnover slows, more large companies are registering a "recession-type surplus."
According to the analysis of the performances of the top-50 companies by CEO Score, a website assessing corporate results, their operating profits in the first three quarters rose 4.6 percent from a year ago but sales slid 6.3 percent on average.
"As the Korean economy grows far more slowly than before and the global business slump continues, companies gripped by a sense of crisis have carried out bold business restructuring, which pushed up their profits but pulled down their sales," a chaebol executive said.
