Hankyung Research Institute: "Last Year's Corporate Performance Decline... More Severe Than During the Financial Crisis"

[Asia Economy Reporter Park Jihwan] A diagnosis has emerged that the performance of domestic companies last year deteriorated more sharply than during the financial crisis.

Korea Ratings held a seminar on the afternoon of the 9th in Yeouido, Seoul, under the theme "2020 Major Industry Outlook and Credit Rating Direction Review," where it announced this.

On this day, Song Taejun, Head of the Evaluation Standards Office at Korea Ratings, stated, "The intensity of credit rating downgrades last year has increased," adding, "The main reason is the corporate performance decline that exceeded expectations."

Song said, "While the sales of listed companies stagnated last year, operating profits are estimated to have decreased by nearly half compared to the previous year," adding, "Even during the financial crisis, corporate performance did not deteriorate to this extent, making this a very unusual phenomenon."

Last year, Korea Ratings upgraded the credit ratings of only 12 companies. In contrast, the number of companies downgraded reached 21.

The "credit rating upgrade-to-downgrade ratio," calculated by dividing the number of upgraded companies by the number of downgraded companies, recorded 0.57, falling below 1. Korea Ratings' credit rating upgrade-to-downgrade ratios were 0.16 in 2015, 0.45 in 2016, 0.63 in 2017, and 0.88 in 2018.

Song explained that the key factors related to credit ratings this year include "the degree of individual companies' performance recovery and financial burden control, the recurrence of the US-China trade dispute, the domestic general election and the US presidential election, and instability in the Middle East."