The operating margin of nonfinancial for-profit corporations rose to 5.2 percent from 4.6 percent a year earlier, the highest since 2021, according to annual data released Wednesday by the Bank of Korea (BOK).
Sales growth, meanwhile, slowed to 2.4 percent from 3.7 percent, highlighting a year in which companies earned more from each unit of revenue even as top-line expansion lost momentum. Pretax profit margins also improved to 5.2 percent from 4.3 percent.
The annual dataset covers 982,767 nonfinancial for-profit corporations, a far broader universe than the BOK's preliminary June assessment of 34,456 externally audited companies.
The broader results showed a sharp divide by company size.
Large companies' operating margin climbed to 6.7 percent from 5.6 percent, while the margin for small and medium-sized enterprises slipped to 2.8 percent from 3.0 percent.
Within SMEs, the margin for medium enterprises edged down to 3.8 percent from 3.9 percent, while that of small enterprises fell further to 1.5 percent from 1.8 percent.
The split came even as sales growth weakened across both groups. Revenue growth at large companies slowed to 2.0 percent from 3.4 percent, while SME sales growth eased to 3.0 percent from 4.1 percent.
The improvement in overall profitability was also concentrated in several industries.
The operating margin for manufacturing rose to 6.3 percent from 5.1 percent, led by electronic, video and communications equipment and shipbuilding-related industries.
The margin for electronic, video and communications equipment surged to 14.0 percent from 8.3 percent as sales of high-value semiconductor products expanded and chip prices increased.
Shipbuilding and other transport equipment saw its margin rise to 11.6 percent from 6.4 percent, helped by greater recognition of high-value vessel sales and easing cost pressure from steel plates.
In the nonmanufacturing sector, the operating margin edged up to 4.3 percent from 4.1 percent, with electricity and gas companies benefiting from lower fuel costs.
Revenue growth, however, slowed across several major industries.
Manufacturing sales growth eased to 2.4 percent from 4.6 percent. Sales at coke and refined petroleum companies contracted 7.6 percent after growing 1.4 percent a year earlier as lower international oil prices pulled down petroleum product prices.
Nonmanufacturing sales growth slowed to 2.3 percent from 2.9 percent. Transportation and storage growth fell to 2.6 percent from 11.6 percent amid lower sea freight rates, while construction sales declined 7.6 percent, widening from a 2.8 percent contraction in 2024 amid continued weakness in the sector.
Corporate debt-servicing capacity improved on average, but financial weakness remained widespread.
The interest coverage ratio, which measures operating profit relative to interest expenses, rose to 292.7 percent from 244.1 percent as operating margins improved and the financial-cost burden eased.
Yet 42.9 percent of companies had an interest coverage ratio below 100 percent, meaning their operating earnings were insufficient to cover interest expenses. That was up from 42.8 percent a year earlier and the highest since comparable data began in 2009.
The share of companies with a negative interest coverage ratio also increased to 34.4 percent from 33.9 percent.
Balance sheets improved overall.
The debt-to-equity ratio fell to 116.2 percent from 119.9 percent, its lowest since 2019, while reliance on borrowings declined to 30.4 percent from 31.0 percent.
Large companies' debt ratio fell to 99.6 percent from 101.5 percent, while the ratio for SMEs declined to 155.2 percent from 162.7 percent.
Borrowing dependence also fell to 25.1 percent among large companies and 40.0 percent among SMEs.
The figures show that stronger earnings at large manufacturers lifted overall corporate profitability in 2025 even as weaker margins and elevated debt-servicing strains persisted among a large share of smaller businesses.
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