Last year, the overall profitability of South Korean companies improved thanks to a semiconductor boom, yet the proportion of distressed firms unable to cover even their interest payments reached an all-time high. This indicates a deepening polarization and downward leveling among businesses.
According to the Bank of Korea's "2025 Corporate Management Analysis" 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 since the relevant statistics began in 2013.
The interest coverage ratio is calculated by dividing operating profit by interest expenses, serving as an indicator of financial health that shows how well a company can pay its interest 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%) has decreased by 6 percentage points over the past 12 years. Meanwhile, the share of companies with an interest coverage ratio above 500% 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 decreases in petroleum refining, coke, and chemical products.
During the same period, the non-manufacturing sector's 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 enterprises and small to medium-sized enterprises fell by 1.6 percentage points and 2.1 percentage points, respectively, to 2.8% and 1.2% compared to 2024.
Profitability indicators showed that last year, 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, reported the highest operating profit margin at 15%, with a net profit margin reaching 18.4%.
Im Ji-woo, 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 semiconductor production companies." She added, "This year, the semiconductor manufacturing sector continues to thrive based on demand from artificial intelligence (AI), and it is expected to improve overall indicators."
While large companies saw increases in both operating profit margin (from 5.6% to 6.6%) and pre-tax net profit margin (from 5.6% to 6.9%), small to medium-sized enterprises experienced declines (from 4.8% to 4.6% and from 3.6% to 3.5%, respectively).
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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