Last year, the overall profitability of South Korean companies improved due to a semiconductor boom, but the proportion of firms unable to even pay interest reached an all-time high. This indicates a deepening polarization and downward leveling among companies.
According to the Bank of Korea's "2025 Corporate Management Analysis Results" released on June 10, 39.9% of the 34,456 non-financial corporations subject to external audits had an interest coverage ratio below 100%, the highest level since the relevant statistics began in 2013.
The interest coverage ratio is calculated by dividing operating profit by interest expenses, serving as a financial health indicator that shows how well a company can cover its interest payments with its earnings.
A ratio below 100% means that after paying interest, a company has no remaining profit, while a ratio below 0% indicates an operating loss.
The share of companies with an interest coverage ratio below 0% also rose from 26.2% in 2024 to 28.2% last year, marking the highest level since 2013.
The data reveals a significant increase in corporate polarization and downward leveling. The proportion of mid-tier companies (with an interest coverage ratio between 100% and 500%) that can pay interest but are not thriving has decreased by 6 percentage points over the past 12 years. The share of companies with an interest coverage ratio above 500% also fell to a record low of 32.6%, down from 33.1% in 2024.
Growth indicators show that the revenue growth rate dropped from 4.2% in 2024 to 2.5% in 2025. In the manufacturing sector, the growth rate declined from 5.2% to 3.2%, primarily driven by petroleum refining, coke, and chemical products.
In the non-manufacturing sector, the growth rate nearly halved, dropping from 3.0% to 1.6%, largely due to declines in construction and transportation and warehousing industries.
By company size, the revenue growth rates for large and small enterprises fell by 1.6 percentage points and 2.1 percentage points, respectively, to 2.8% and 1.2% compared to 2024.
In terms of profitability, companies' operating profit margin (6.2%) and pre-tax net profit margin (6.3%) improved from 5.4% and 5.2% in 2024.
In manufacturing, the operating profit margin rose from 5.5% to 6.9%, and the pre-tax net profit margin increased from 6.3% to 7.6%. In non-manufacturing, the operating profit margin grew from 5.2% to 5.4%, while the pre-tax net profit margin rose from 3.9% to 4.7%.
Notably, the electronics, video, and communication equipment sector, which includes semiconductors, had the highest operating profit margin at 15%, with a net profit margin reaching 18.4%.
Lee Mi-joo, head of the Bank of Korea's corporate statistics team, explained, "The increase in operating profit margins is attributed to higher sales of value-added products and the growth in operating profit margins of two major semiconductor producers." She added, "This year, the semiconductor manufacturing sector is expected to continue its strong performance driven by demand from artificial intelligence, which will likely improve overall indicators."
While large companies saw their operating profit margin and pre-tax net profit margin rise (from 5.6% to 6.6% and from 5.6% to 6.9%, respectively), small businesses experienced declines (from 4.8% to 4.6% and from 3.6% to 3.5%).
The debt ratio of companies decreased from 103.4% in 2024 to 98.3%. The reliance on borrowed funds also fell from 28.4% to 27.3%.
* This article has been translated by AI.
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