Top 30 Groups Suffer Sales Drop, Higher Costs Over 6 years

(image: kobizmedia/ Korea Bizwire)

SEOUL, Aug. 24 (Korea Bizwire) — South Korea’s top 30 conglomerates have seen their sales growth and profitability worsen over the past six years amid increased costs, a report showed Thursday.

Per capita sales of 164 listed companies belonging to the leading business groups fell at an annual average rate of 1.8 percent between 2011 and 2016, with the amount reaching 957 million won (US$848,000) last year, according to the report from the Korea Economic Research Institute (KERI).

Per capita operating profit of the companies also declined at an annual average rate of 3 percent over the cited period, coming to 63.1 million won last year.

In contrast, their per capita labor cost increased at an annual average rate of 4 percent during the six-year period, reaching 91.7 million won in 2016.

KERI, affiliated with the country’s conglomerate lobby Federation of Korean Industries, said the top business groups suffered setbacks in sales and profitability due to slackening global trade and low growth of Asia’s fourth-largest economy.

The conglomerates’ labor costs have risen regardless of their poor performances because it is difficult to roll back wages once they are raised, the think tank added.

The report also showed their ratio of labor costs to sales climbing to 9.6 percent in 2016 from 7.2 percent in 2011 due to increased fixed costs and wage increases.

The ratio of operating profit to the top line rebounded to 6.6 percent last year from 5.5 percent in 2014 on the back of their cost-cutting efforts sparked by a wave of corporate restructuring.

(Yonhap)