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| gettyimagesbank |
By Lee Yeon-woo
Over half of small and medium-sized enterprises (SMEs) listed on the stock market have reported operating losses for the fourth quarter of 2022, according to a report Thursday.
The number of such firms is projected to increase further this year due to the slowing economy, rising costs and the waning demand for pandemic-related items.
According to the report released by Woori Finance Research Institute, 700 SMEs with total combined sales below 100 billion won ($75.62 million) recorded 12.2 trillion won in sales during the fourth quarter of last year, which is the highest ever.
However, they recorded a combined operating loss of 156.7 billion won during the cited period, resulting in an operating profit margin of minus 1.3 percent.
Out of the 700 firms, 391, or 56 percent, experienced a decrease in operating profit during the fourth quarter of 2022, compared to the same period in 2021. The number of firms reporting operating losses for the fourth quarter of 2022 increased by 19 percent to 346 from 290.
"The trend of slowing growth and profitability is similar across all non-financial listed firms. However, SMEs are experiencing a faster deterioration in performance as they are more sensitive to changes in macroeconomic and market conditions," the report noted.
The report highlighted that products related to the COVID-19 pandemic, such as diagnostic kits, games and food are showing signs of declining demand. Cosmetics and textiles, which had rebounded temporarily when Korea began easing its social distancing and travel rules, are also experiencing a decrease in sales.
The report anticipates the trend of weakened growth and profitability will continue this year. It estimated the growth rate of sales to fall below 10 percent for the first time in three years due to an investment slump, while industries that have benefited from the pandemic, such as bio and computers, will also contract.
"The burden of rising costs cannot be solved in the short term. And the margin is expected to shrink as well, as firms were unable to reflect the rising costs in the product prices due to excessive supply," the report noted, warning that the ratio of businesses in the red, currently around half of them, is likely to surge even further.
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