S.Korean corporate debt ratio hits six-year high in Q3

South Korean corporate debt ratio rose to a six-year high in the third quarter as sales growth and profitability fell, darkening the outlook for Asia’s fourth-largest economy, central bank data showed on Thursday.

Non-financial companies’ debt-to-equity ratio rose to 92.6% in the July-October period, the highest since the second quarter of 2016, from 91.2% in the April-June 2022 period, the Bank of Korea said.

The ratio for non-manufacturing industries such as the electricity and gas sector advanced to 129.8% from 126.7% with the utility sector’s ratio up to 280.1% from 228.7%. The manufacturers’ debt ratio edged up to 71.3% from 70.8%.

Sales of overall non-financial companies rose 17.5% from a year earlier in the third quarter, slower than a 20.5% increase in the previous three months.

Among manufacturers, growth in sales of metal product makers, as well as machinery, electrical equipment and electronics producers slid to 9% and 7.2%, respectively, from 22.4% and 17.5%. In the non-manufacturing sectors, revenue growth in the transportation companies and constructors slowed to 25.8% and 10%, respectively, from 35.9% and 17.5%.

Non-financial companies’ profitability deteriorated on higher commodity prices and sluggish exports.

The operating profit to sales ratio fell to 4.8% in the third quarter from 7.5% a year earlier, while the net profit before taxes to sales ratio also skidded to 5% from 8.4%.

Write to Mi-Hyun Jo at mwise@hankyung.com
Jongwoo Cheon edited this article.