Profit margin erodes for top 20 chaebol

The profitability of 16 of the top 20 Korean conglomerates in 2012 worsened to levels below those recorded during the global economic crisis in 2008, and the downward trend has continued this year, according to market data.

Their operating profit margin, or margin ratio, averaged 5.6 percent, meaning they made 56 won ($0.05) on every 1,000 won in sales, according to the Korea Exchange and Chaebul.com. Combined sales were 1,076 trillion won against operating profit combined of 61 trillion won.

That is down 10.3 percent compared with the average margin of 63 won in 2008.

OCI’s profitability plummeted 91 percent over the past four years. Its margin in 2008 was 155 won per 1,000 won in sales, but last year it was 14 won. Doosan’s profitability slid 66.2 percent from 77 won to 26 won, while Hyundai Heavy Industries’ fell by 69.6 percent from 112 won to 34 won.

STX’s margin was 74 won out of 1,000 won in 2008, but it was minus 24 won last year. Hyundai Group also recorded a loss last year.

Only four of the 20 chaebol groups saw profitability improve over the past four years. Samsung Group, the country’s largest conglomerate, earned 104 won per 1,000 won in sales last year, which was up 67.7 percent. Hyundai Motor Group’s margin ratio rose from 63 won in 2008 to 77 won last year, while Lotte Group’s improved from 51 won to 57 won.

Booyoung’s margin improved by 41.7 percent to 255 won from 180 won in 2008.

For this year, of the 569 Kospi-listed companies that have settlement of their accounts in December, 501 made their information available as of yesterday, and their average margin ratio - except for Samsung Electronics - dropped to 4.51 percent in the first half of the year from 4.7 percent during the same period last year.

The third quarter also saw many Korean companies struggle. Hyundai Motor’s margin ratio fell by 0.4 percentage point to 9.7 percent in the third quarter from a year earlier. Posco’s sales dropped 3.7 percent to 15.2 trillion won in the third quarter from a year earlier, while its operating profit declined 38 percent to 632.8 billion won.

Market experts attribute the numbers to the global economic slump and weak domestic demand.

BY MOON GWANG-LIP [joe@joongang.co.kr]