Profitability Polarization Between Large Companies and SMEs Deepens... Companies Struggling to Cover Interest Expenses Hit 'Record High'

Bank of Korea: "Results of the 2025 Annual Corporate Management Analysis"
Profitability gains led by large companies in semiconductors and shipbuilding

Last year, domestic companies' profitability and stability indicators improved, while growth slowed. Profitability improvements led by semiconductors and shipbuilding also deepened the polarization in profitability between large and small and medium-sized enterprises. The share of companies unable to cover even their interest expenses with operating profit also reached a record high.

Import and export cargo is piled up at the Shinsundae Terminal at Busan Port. Yonhap News

According to the "Results of the 2025 Annual Corporate Management Analysis" released by the Bank of Korea on Oct. 21, the sales growth rate of nonfinancial for-profit corporations that filed corporate tax returns with the National Tax Service last year (982,767 companies) was 2.4%, down from 3.7% the previous year.

By industry, the rate fell in manufacturing (4.6%→2.4%), mainly in coke and refined petroleum products, and in non-manufacturing (2.9%→2.3%), mainly in transportation and storage and construction. The rate for coke and refined petroleum products fell by 7.6%, which the Bank of Korea attributed largely to lower petroleum product prices following a decline in international oil prices. In transportation and storage, the growth rate fell from 11.6% the previous year to 2.6% in 2025, as growth in transportation revenue slowed amid lower ocean freight rates. In construction, the decline in sales widened to 7.6% amid a downturn in the construction industry.

By company size, the growth rate for large companies fell from 3.4% to 2.0%, while that for small and medium-sized enterprises also declined, from 4.1% to 3.0%. A breakdown of small and medium-sized enterprises shows declines among both medium-sized companies (1.0%→0.5%) and small companies (8.8%→6.7%).

The operating profit margin, which indicates corporate profitability and is calculated as operating profit as a percentage of sales, was 5.2%, up from 4.6% the previous year. This was the highest level since 2021, when it stood at 5.6%.

By industry, the rate rose in both manufacturing (5.1%→6.3%) and non-manufacturing (4.1%→4.3%). In manufacturing, the increase was led by electronic, video, and communications equipment (8.3%→14.0%) and shipbuilding and other transportation equipment (6.4%→11.6%). The electronic, video, and communications equipment sector benefited from expanded sales of high-value-added semiconductor products and rising semiconductor prices. The shipbuilding and other transportation equipment sector was supported by increased recognition of revenue from high-value-added vessels and a reduced cost burden for materials such as thick steel plate. In non-manufacturing, the increase was led by the electricity and gas sector (6.7%→8.7%), which benefited from a lighter cost burden due in part to lower fuel prices.

By company size, the operating profit margin of large companies rose from 5.6% to 6.7%, while that of small and medium-sized enterprises (3.0%→2.8%) declined. Margins also fell for both medium-sized companies (3.9%→3.8%) and small companies (1.8%→1.5%).

As profitability indicators diverged between large and small and medium-sized enterprises, the share of companies unable to cover even their interest expenses with operating profit instead increased. The interest coverage ratio rose from 244.1% to 292.7%, but the share of companies with a ratio below 100% edged up from 42.8% to 42.9%. This was the highest level since the relevant data series began in 2009. The interest coverage ratio measures a company's ability to meet financial expenses using income generated from its business activities. A higher ratio means a company has more room to cover its expenses.

In terms of stability, the debt-to-equity ratio, which measures debt relative to equity, fell from 119.9% to 116.2%. This was its lowest level since 2019, when it stood at 115.6%. The dependence on borrowings, which indicates the share of corporate debt made up of funds raised externally, such as foreign capital, bank loans, and corporate bonds, fell to 30.4% from 31.0% a year earlier.

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