Korean listed firms’ operating profit margins fall to 4% in Q1

SK hynix Inc. headquarters in Icheon [Photo by Yonhap]

South Korea’s listed companies suffered a sharp decline in operating profit margins in the first quarter of this year, except for Hyundai Motor Co. and Kia Corp.

The average operating margin for 108 companies reporting earnings in the January-March period plunged to 4.01 percent, the lowest first-quarter level since the introduction of International Financial Reporting Standards (IFRS) in 2011, according to the Korea Exchange and FnGuide on Monday.

Except for Hyundai Motor and Kia, which fared better in the quarter, the operating margins of most listed companies deteriorated due to the worst performance of big companies like Samsung Electronics Co. and SK hynix Inc.

The listed companies, excluding financial firms, that reported provisional first-quarter results had a combined revenue of 350 trillion won ($261 billion) and an operating profit of 14.3 trillion won. Compared to the first quarter of last year, revenue increased by 3.6 percent, but operating profit plummeted by 58.2 percent.

This is less than half the operating margin of more than 10 percent in the first quarter of last year. The 4.09 percent margin was also the second lowest of all quarters.

The worst operating margin for listed companies was mainly due to Samsung Electronics’ operating profit falling below 1 trillion won and SK hynix’s huge loss.

However, excluding these two companies, the average operating margin was only 6.07 percent, which is the lowest level in three years since 2020, when the pandemic began. The figure was in the 7 percent range in 2022 and 2021.

None of South Korea’s major listed companies had operating margins above 30 percent in the first quarter of this year amid the global economic downturn and sluggish demand.

In addition, except for Hyundai Motor and Kia, most of the companies showed weak operating margins compared to their global peers.

According to market data, 148 companies, excluding financial firms, in the U.S. S&P500 that have reported first-quarter results through April 27 had a combined revenue of $1.23 trillion and an operating income of $191.2 billion. The operating profit margin of major Korean listed companies that have reported first-quarter results is only 4 percent, while the corresponding figure of major U.S. companies is 15.6 percent.

In the first quarter of last year, these companies reported $1.179 trillion in revenue and $203.1 billion in operating income, with an operating margin of 17.2 percent.

Meanwhile, Hyundai Motor and Kia beat Tesla Inc. and General Motors Co. in terms of operating margin. Kia’s operating margin was 12.1 percent, higher than Tesla’s 11.4 percent and GM’s 6.4 percent. Hyundai Motor’s operating margin was 9.5 percent.