n the second quarter of this year, South Korean companies experienced their first negative revenue growth in two years. The Donald Trump administration’s steep tariffs hit the automotive and transportation equipment sectors particularly hard, while the petrochemical and machinery/electronics industries also struggled.
Corporate profitability indicators—including operating profit margins—declined across the board, with large corporations experiencing a notable slowdown in earnings.
The Bank of Korea’s 2025 Q2 Corporate Management Analysis Results, released on Wednesday, revealed that over 26,000 externally audited corporations recorded a 0.7% year-over-year decrease in revenue. This marks a shift to negative growth after just three months, following a 2.4% increase in the first quarter.
Such a low corporate revenue growth rate has not been seen since the fourth quarter of 2023 (-1.3%), marking the first revenue contraction in 18 months.
By sector, manufacturing revenue growth plunged from 2.8% in Q1 to -1.7% in Q2.
The petrochemical sector was hit particularly hard, falling from -1.9% to -7.8% as lower oil prices and reduced plant utilization rates negatively impacted export revenues. The machinery and electronics sector slowed from 5.9% to 2.2%, benefiting from increased artificial intelligence (AI) investment that boosted high-value semiconductor exports, though it faced challenging comparisons to last year’s growth of over 20%.
Non-manufacturing revenue growth also decelerated, dropping from 1.9% in Q1 to just 0.3% in Q2. The retail and wholesale sectors eased from 5.0% to 2.0% due to reduced steel trading and energy-related imports, while the transportation sector reversed from a 5.6% growth to a 0.5% decline, hit by falling freight rates and the elimination of small-scale tax exemptions.
The revenue slump directly affected profitability. Overall operating profit margins fell to 5.1%, down 1.1 percentage points from 6.2% a year ago. Pre-tax net profit margins also declined, dropping from 6.7% to 5.3% during the same period.
In manufacturing, operating profit margins dropped from 7.1% to 5.1%. The automotive and transportation equipment sectors experienced a sharp decline from 7.6% to 2.7% due to tariffs and intense promotional competition, while the machinery and electronics sector fell from 10.2% to 7.4%, impacted by inventory valuation losses. On a positive note, the electricity and gas sector improved from 3.2% to 5.0%, benefiting from stable fuel prices.
Large corporations clearly bore the brunt of the profitability decline, with their operating profit margins falling from 6.6% to 5.1%. In contrast, small and medium-sized enterprises saw a slight improvement from 4.4% to 5.0%, primarily driven by professional services.
Regarding financial stability, the debt-to-equity ratio remained steady at 89.8%. However, the proportion of interest-bearing external debt to total capital rose from 25.0% to 26.6%, reaching its highest level since Q2 2015 (26.9%).
Looking ahead to Q3, negative impacts from tariffs are expected to persist. Moon Sang-yoon, head of the Bank of Korea’s corporate statistics team, noted that while tariff uncertainties have eased somewhat following negotiations, they remain elevated. Moon added that it anticipates continued negative effects, although the base effects from semiconductors should dissipate.