Korean Large Business Profits Surge, But Investments Stall
Although major domestic conglomerates have increased their operating profits by nearly 279 trillion won (about $201 billion) over the past year, their investments for future growth have not significantly increased compared to the previous year, remaining at a standstill.Despite a substantial increas
Large Korean businesses witnessed a significant surge in operating profits, with a notable 279 trillion won increase over the past year. However, this growth in profits did not translate into substantial investments for future expansion. Despite soaring sales and cash reserves, capital expenditures (CAPEX) remained stagnant at approximately 147 trillion won.
When excluding the giants Samsung Electronics and SK hynix, CAPEX saw a sharp 11.1% decline, while operating profits skyrocketed by 72.3%. The analysis by Leaders Index revealed that while the surveyed companies' cash and cash equivalents surged by 37.5%, CAPEX remained virtually unchanged. This disparity between profitability and investment remains puzzling, as it suggests a disconnect between financial performance and growth initiatives.
The investment trends varied across industries, with certain sectors cutting back on CAPEX while others saw substantial growth. Industries like secondary batteries, petrochemicals, pharmaceuticals, biotechnology, and telecommunications saw a sharp decline in CAPEX, whereas defense, services, transportation, and shipbuilding, machinery, and facilities witnessed a surge in investments.
The effect was particularly pronounced in the services sector, which expanded by 36.1%, while the transportation industry grew by 25.3%. Despite this divergence in investment directions, the overall CAPEX increase of all 331 companies was largely neutralized by the exception of Samsung Electronics and SK hynix, whose CAPEX grew by 14.2% and 71.5%, respectively.
Written by urgent.news from BusinessKorea's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
