Sales of large South Korean companies plunged nearly 6 percent on-year in the second quarter of this year amid a continued downturn in exports, central bank data showed Tuesday.
Sales of large companies dropped 5.7 percent in the April-June period from a year earlier, while those of domestically-focused small and medium enterprise gained 2 percent, according to the quarterly data by the Bank of Korea. Overall corporate sales dropped 4.3 percent in the three-month period.
The drop in large firms’ sales quickened from a 5.5 percent decline in the previous quarter, and those of SMEs mark a turnaround from a 0.6 percent slip three months earlier.
Sales of large manufacturing firms dropped 7.5 percent on-year in the second quarter, the fastest clip since the central bank began compiling such data in 2003.
The figures are based on a survey of 3,065 businesses out of 16,281 local firms, each with total assets of more than 12 billion won ($10.19 million).
The drop in their sales came amid a continued downturn in exports. South Korea’s outbound shipments dropped for eight consecutive months since the beginning of the year, plunging 14.7 percent on-year in August alone, the trade ministry said earlier.
“A drop in raw material prices made the difference for large and smaller firms as the cut in prices of raw materials inevitably affected the price of products and exports,” said Park Seong-bin, head of the central bank’s corporate statistics team.
“Large companies saw their sales drop as they are more focused on exports with products, such as steel and petrochemicals, that are more vulnerable to changes in prices while SMEs are more focused on the domestic market and carry products that are less affected by changes in raw material prices,” he added.
Sales of petrochemical companies tumbled 15.9 percent on-year in the second quarter, according to the BOK data. The trade ministry earlier said local petrochemical companies’ exports plunged 12.8 percent in June, while the average price of Dubai crude, which accounts for more than 80 percent of South Korea’s total oil imports, plunged to $57.70 per barrel from $104.60 a year earlier.
Despite a dip in sales, the local firms’ profitability improved in the second quarter from a year earlier as lower prices of raw materials helped cut their costs.
The companies’ profitability, measured as the ratio of their operating income to sales, reached 5.6 percent in the quarter, up from 4.8 percent a year earlier and also from 5.1 percent in the first quarter.
The BOK data also showed the local companies became financially healthier in the second quarter as their debt-to-equity ratio slipped to 104.2 percent from 105.7 percent three months earlier.
The data comes amid growing concerns that weak exports, coupled with the outbreak of Middle East Respiratory Syndrome in May will put further strains on the local economy.
The central bank has twice downgraded its growth outlook for the year, lowering it from an initial 3.4 percent at the start of the year to 3.1 percent in April and again to 2.8 percent in July. (Yonhap)
