So-called "zombie corporations" that cannot even cover interest costs with operating profit accounted for 42.8% of all corporations last year. It was a record high since the statistics began. Operating profit improved in some sectors such as semiconductors, but profitability worsened mainly among small corporations, leading to this result.
According to the "2024 Corporate Management Analysis (preliminary)" released by the Bank of Korea (BOK) on the 12th, the interest coverage ratio of domestic nonfinancial for-profit corporate corporations last year was 244.1%, up from 191.1% a year earlier. The interest coverage ratio is operating profit divided by financial costs (interest costs) and indicates a corporation's debt repayment capacity.
While corporations' overall debt repayment capacity improved, polarization between corporations also intensified. According to the BOK, the share of corporations with an interest coverage ratio below 100%, meaning they cannot fully pay interest even with operating profit, came to 42.8%. This is the highest since related statistics began in 2009.
Moon Sang-yun, Head of Team of the BOK's corporate statistics team, said, "Operating profit rose sharply mainly among some sectors such as semiconductors and large corporations, but small, non-investment-grade corporations had weak profitability," adding, "As a result, the overall interest coverage ratio increased, but the share of corporations below 100% also expanded at the same time."
Indicators of corporate growth improved. Sales of domestic nonfinancial for-profit corporate corporations rose 3.7% last year. The growth rate improved from -1.5% a year earlier. Another growth indicator, the total asset growth rate, also climbed from 6.3% to 7.0%. The increase was led by the tangible asset growth rate within total assets, which rose from 7.6% to 9.5%.
The profitability indicator, the operating margin on sales (operating profit ÷ sales), also rose from 3.5% to 4.6%. By industry, manufacturing jumped from 3.3% to 5.1% led by electronic, video, and communications equipment, while nonmanufacturing rose from 3.7% to 4.1% led by electricity and gas. The pre-tax net profit margin on sales for all corporations increased from 3.8% to 4.3%.
Stability indicators also improved. The liability ratio of corporations fell from 120.8% to 119.9%, and the borrowing fund dependence decreased from 31.4% to 31.0%. Both manufacturing and nonmanufacturing saw declines in liability ratios and borrowing fund dependence. However, there were differences by corporation size. Large corporations saw the liability ratio edge up from 101.0% to 101.5%, while small and midsize corporations fell from 166.9% to 162.7%.
Head of Team Moon explained, "As capital increased more, centered on retained earnings, the liability ratio fell," adding, "When operating profit increases, net income rises and capital increases, improving stability as a natural flow."