Semiconductors and Large Corporations Thrive, But 40% of Companies Unable to Cover Interest Expenses, Highest on Record

Bank of Korea's "2024 Corporate Management Analysis (Preliminary Report)"

39.9% of Companies Have Interest Coverage Ratio Below 100%... Up 1.4 Percentage Points in One Year

Profitability Indicators Improve Led by Samsung Electronics and SK h

Last year, 4 out of 10 domestic companies struggled to cover their interest expenses with operating profits. This was due to the deterioration in operating profit margins among small and medium-sized enterprises, despite overall profitability indicators improving, led by the semiconductor sector.

According to the "2025 Corporate Management Analysis (Preliminary)" released by the Bank of Korea on June 10, the proportion of companies with an interest coverage ratio below 100% was 39.9%, up 1.4 percentage points from the previous year (38.5%). This is the highest level since related statistics began to be compiled in 2013. An interest coverage ratio below 100% means that a company's annual earnings are insufficient to cover financial expenses such as interest.

The proportion of companies with an interest coverage ratio that did not exceed 0% due to operating losses also rose to 28.2%, up 2.0 percentage points from the previous year's 26.2%. The analysis covered 34,456 corporations subject to external audit (excluding financial institutions).

The share of high-performing companies with an interest coverage ratio above 500% decreased by 0.5 percentage points, from 33.1% to 32.6%. The overall interest coverage ratio of the surveyed companies rose from 305.8% to 369.8% over the same period, in line with higher operating profit margins.

Last year, the growth of the companies surveyed slowed, but both profitability and stability improved.

The sales growth rate, which measures growth, dropped from 4.2% in 2024 to 2.5% last year. By industry, manufacturing (3.2%) saw a slowdown in sales growth, especially among manufacturers of related products, due to global oversupply in the petrochemical market. The non-manufacturing sector (1.6%) experienced a reduced growth rate, particularly in transportation, mainly due to tariff impositions and other factors. By company size, large corporations saw their sales growth fall from 4.4% to 2.8%, and small and medium-sized enterprises from 3.2% to 1.2%. In contrast, the total asset growth rate increased from 6.5% to 6.7%.

The operating profit margin, an indicator of profitability, rose to 6.2% from 5.4% the previous year. In manufacturing (6.9%), sales of high value-added products for AI servers increased, and rising semiconductor prices led to a significant increase in electronics, video, and telecommunications equipment (15%). The non-manufacturing sector (5.4%) saw a modest increase, mainly in electricity and gas, due to higher electricity rates and lower energy prices. By company size, large corporations (from 5.6% to 6.6%) saw an increase led by manufacturing, while small and medium-sized enterprises (from 4.8% to 4.6%) saw a slight decline. The pre-tax net profit margin rose from 5.2% to 6.3%.

Lee Mijoo, head of the Corporate Statistics Team at the Economic Statistics Department 1 of the Bank of Korea, explained that while growth slowed, profitability increased, stating, "There was an increase in sales of high value-added products, but the rise in semiconductor prices was a key driver." She added, "The higher operating profit margin was due to the sale of more high value-added products and a significant increase in semiconductor prices, which substantially raised the operating profit margins of two major semiconductor manufacturers." Excluding Samsung Electronics and SK hynix, the operating profit margin was recorded at 4.9% last year.

Lee also commented on growth, saying, "It may appear to have declined because the sales growth rate in 2024 was so high, but even a rate of 15.1% is an extremely high level."

The operating profit margin of electronics, video, and telecommunications equipment industries, including semiconductors, is expected to continue driving overall indicator improvement this year. Lee said, "Up to the first quarter, the semiconductor manufacturing industry has been performing well, driven by AI demand. We will need to monitor performance going forward, taking into account demand in the second half and other various factors."

Meanwhile, stability indicators showed improvement, with the debt-to-equity ratio falling from 103.4% in 2024 to 98.3% last year, and the dependence on borrowings also dropping from 28.4% to 27.3% over the same period.

This content was produced with the assistance of AI translation services.