Growth and Profitability of Domestic Companies Decline in Q2: "Petrochemical Export Slump, U.S. Tariffs to Blame"

Bank of Korea Releases Q2 Corporate Management Analysis
Sales Growth Rate of Audited Companies Turns Negative in Q2
Lowest Level Since Q4 2023
Operating Margin on Sales at 5.1%, Down from Previous Quarter

In the second quarter of this year, the growth of domestic companies deteriorated and profitability slowed. This was due to a combination of negative factors, including a decline in exports in the petrochemical sector, a base effect from last year's strong semiconductor exports, and the impact of U.S. tariffs.

According to the "Corporate Management Analysis Results for the Second Quarter of 2025" released by the Bank of Korea on September 10, the sales growth rate, which indicates the growth of domestic companies subject to external audits, turned negative at -0.7% in the second quarter, compared to 2.4% in the previous quarter. This is the lowest figure since the fourth quarter of 2023 (-1.3%). The Bank of Korea estimated these results by conducting a sample survey of 4,233 companies out of 26,067 corporations subject to external audits.

By industry, both manufacturing and non-manufacturing sectors declined. The sales growth rate in manufacturing shifted from 2.8% in the first quarter to -1.7% in the second quarter. In the petrochemical sector, the rate dropped from -1.9% to -7.8%, and in machinery and electrical/electronics, it fell from 5.9% to 2.2%, both dragging down the overall manufacturing sales growth rate. Moon Sangyun, head of the Corporate Statistics Team at the Economic Statistics Department 1 of the Bank of Korea, explained, "In the petrochemical sector, exports decreased due to falling oil prices and lower facility utilization rates. For machinery and electrical/electronics, despite robust exports of high value-added products, the growth rate shrank due to a base effect from the high sales growth rate (2.07%) in the same quarter last year."

In the non-manufacturing sector, the sales growth rate fell from 1.9% in the first quarter to 0.3% in the second quarter, mainly due to declines in wholesale/retail and transportation. Wholesale/retail (5.0%→2.0%) was affected by reduced steel transactions and lower energy-related imports. Transportation (5.6%→0.5%) was influenced by falling shipping rates and a decrease in e-commerce after the United States abolished the de minimis exemption for Chinese goods.

By company size, both large enterprises and small and medium-sized enterprises (SMEs) saw declines. Large enterprises shifted from 2.6% to -0.6%, and SMEs from 1.4% to -1.3%, with both turning negative.

Profitability also weakened. The operating margin on sales, which reflects profitability, fell to 5.1% in the second quarter from 6.2% in the previous quarter.

By industry, the operating margin on sales in manufacturing dropped from 7.1% to 5.1%. The transportation equipment sector (7.6%→2.7%) was affected by U.S. tariffs and intensified promotional competition, while machinery and electrical/electronics (10.2%→7.4%) saw one-off expenses due to inventory valuation losses at some companies, both dragging down manufacturing profitability. In the non-manufacturing sector, the transportation industry (9.1%→7.0%) faced increased fixed costs due to a decline in sales from lower shipping rates, while the electricity and gas industry (3.2%→5.0%) benefited from stable fuel prices. As a result, the overall non-manufacturing sector maintained the same level (5.1%) as the same quarter last year.

By company size, large enterprises (6.6%→5.1%) saw a decline, while SMEs (4.4%→5.0%) improved. Moon explained, "For SMEs, the survey is based on sample estimates, and by industry, the improvement was mainly driven by specialized services." He added, "Although U.S. tariffs have been resolved in the third quarter, the situation remains highly uncertain, so negative factors are expected to persist. The sustainability of the petrochemical industry will also have an impact."

Meanwhile, in terms of stability indicators, the debt ratio remained at 89.8%, the same as the previous quarter, while the dependence on borrowings rose from 25% to 26.6%.