[Urgent Survey of Top 1000 Companies] Numerous Companies Falling Short of This Year's Management Goals

Akyung-Keongryeon, Survey on Business Environment of Top 1,000 Revenue Companies
"Both Exchange Rates and Interest Rates Exceeded Bearable Levels"
3 out of 10 Companies Find It Difficult to Achieve Business Goals Set at the Beginning of the Year

[Asia Economy Reporter Park Sun-mi] Three out of ten of the top 1,000 domestic companies by sales expect it will be difficult to achieve the performance targets set at the beginning of the year. This is due to the rapid surge in factors affecting corporate management such as the won-dollar exchange rate, inflation, and interest rates. Additionally, most companies anticipate that next year's business environment will be similar to or worse than this year, leading them to adopt conservative management strategies. Accordingly, next year is expected to see a full-scale reduction or withdrawal of investments by major companies, workforce restructuring, and the sale of held assets.

On the 24th, Asia Economy, in collaboration with the Federation of Korean Industries, conducted an 'Economic and Business Environment Survey' targeting the top 1,000 domestic companies by sales. The results showed that three out of ten companies responded that it would be difficult to achieve the management goals set at the beginning of the year by the end of the year.

When asked whether they adjusted their performance (operating profit) forecasts compared to the beginning of the year, 51% answered that they maintained the initial level, but 33% responded that they had lowered their forecasts compared to the beginning of the year. Due to effects such as improved price competitiveness in overseas markets from the rising exchange rate, only 16% responded that they had raised their performance forecasts.

The main reason companies lowered their performance forecasts this year was the increase in production costs (60.6% response) caused by the surge in exchange rates and raw material prices. Other reasons cited included global demand sluggishness due to major countries' tightening policies (21.2%) and production disruptions caused by damage to global supply chains (15.2%).

The average expected change in operating profit for this year is around -1.6%. The largest proportion, 58%, expected a change within the range of -5% to 5%, but 28% anticipated a reduction in operating profit of more than 5%, with responses including -10% to -5% (14%), -15% to -10% (6%), -20% to -15% (5%), and over -20% (3%).

As performance and economic downturns are expected, many companies have also failed to realize investments as planned at the beginning of the year. While 58% of respondents said they were executing investments as scheduled, 37% reported investment reductions. The most common reason for investment cuts was difficulties in raising investment funds due to the sharp rise in interest rates (35.2%), followed by reduced investment capacity due to worsening performance (29.7%) and increased domestic and international economic uncertainties (29.7%).

Companies' lowering of performance forecasts and considerations of investment reduction or withdrawal, workforce restructuring, and asset sales are interpreted as a result of the business environment factors such as exchange rates, inflation, and interest rates exceeding manageable levels for corporate management.