The Bank of Korea: "Domestic Companies in Q1 Show Improvement in Growth and Profitability"

Improvement Centered on Large Manufacturing Companies like Semiconductor and Transportation Industries
Small and Medium Enterprises Still Facing Difficulties

A dense area of office buildings in downtown Seoul. Photo by Younghan Heo younghan@

In the first quarter, the growth and profitability of domestic companies improved, mainly among large manufacturing companies such as semiconductor and transportation industries. On the other hand, indicators for small and medium-sized enterprises (SMEs) worsened, revealing a disparity in economic improvement depending on company size.

According to the "2024 Q1 Corporate Management Analysis Report" released by the Bank of Korea on the 20th, the sales growth rate of domestic externally audited companies turned positive from -1.3% in the previous quarter to 1.2% in the first quarter of this year, showing signs of improved growth.

The Bank of Korea explained that out of 22,962 externally audited corporate entities as of the end of 2022, a sample survey was conducted on 3,979 companies.

By industry, the manufacturing sector's sales growth rate rose from 0.9% in Q4 last year to 3.3% in Q1 this year. Kang Young-kwan, head of the Corporate Statistics Team at the Bank of Korea, said, "Indicators improved as semiconductor exports, centered on high value-added products, increased significantly."

During the same period, the non-manufacturing sector's decline narrowed from -4.0% to -1.6%, with reduced decreases mainly in transportation and electricity and gas industries.

By company size, large enterprises reversed from -1.3% to 3.0%, while SMEs saw the decline widen from -1.5% to -6.9%.

The operating profit margin on sales for the surveyed externally audited companies in Q1 was 5.4%, showing improved profitability compared to 2.8% recorded in the same period last year.

By industry, manufacturing rose from 2.5% in Q1 last year to 5.4% this year, and non-manufacturing increased from 3.2% to 5.3%.

Looking in detail, the machinery and electrical/electronics sector improved significantly from -3.1% to 5.6%. The rise in semiconductor prices and the resulting reversal of inventory asset valuation losses contributed to the improved indicators.

The automobile and transportation equipment sector also improved from 3.3% to 6.0%, with the Bank of Korea analyzing that profitability improved due to rising new ship prices and strong sales centered on high value-added ships.

The electricity and gas sector also saw a sharp improvement from -7.2% to 7.2% during the same period, with profitability improving due to a decline in wholesale electricity prices (cost of sales).

By company size, large enterprises increased from 2.4% to 5.7%, but SMEs declined from 4.7% to 3.8%.

Although growth and profitability improved, stability indicators were somewhat weak. The debt ratio of surveyed companies in Q1 rose to 92.1% from 89.2% in the previous quarter. Debt ratios increased across manufacturing and non-manufacturing sectors, as well as large enterprises and SMEs. Dependence on borrowings also rose to 25.7% in Q1 from 25.4% in the previous quarter.