A select number of Korean companies are keeping up profits against flagging sales from depressed demand at home and abroad more through desperate cost-cutting endeavors than earnings, darkening prospects for sustainability in their growth.

According to data compiled by Korea Exchange and local market data provider FnGuide Tuesday, the 1,366 Korean companies listed in the main Korean Composite Stock Price Index (Kospi) and the secondary Korea Securities Dealers Automated Quotation (Kosdaq) raked in 38.9 trillion won ($33.2 billion) in combined operating profit on sale of 475.2 trillion won in the third quarter ended September. Their combined third-quarter operating income rose 13.9 percent from 34.1 trillion won from a year ago, but sales slid 8.9 percent from 521.9 trillion won over the same period.

“The gains in operating income of the listed companies were mainly stemmed from cost-cutting efforts and falling commodity prices,” said Oh Hyun-suk, head of investment strategy center at Samsung Securities Co. “Such a growth model cannot be sustainable,” Oh added that it would be hard to expect simultaneous growth in sales and profit for a while.

By industry, six industries saw their sales rise in the third quarter, whereas those of 11 others slipped, according to data. Combined sales of transportation equipment manufacturers dropped 11 percent on year, hit by Hyundai Motor Co.’s disrupted production after its workers’ lengthy strikes. Electrical and electronics industry also fared worse than last year, with their total sales down 8 percent. The construction sector saw combined operating profit surge 38 percent year over year on sales that edged up 1.7 percent, suggesting they also succeed to boost profit by reducing spending.

Of top ten conglomerates in terms of sales, seven companies, including LG Electronics Inc., Posco and Kia Motors Corp., saw their sales fall in the third quarter. Korean firms in the manufacturing industry as a whole struggled.

The outlook for the fourth quarter is grimmer. It would not be easy to ramp up exports, a major driver of the country’s economic growth, under U.S. president-elect Donald Trump who had not been shy about nationalistic and protectionist position on the trade front. Emerging economies, such as Latin America, main importers of Korean goods, would be hurt by new trade barriers of Washington.

Meanwhile, Seoul is without leadership with President Park Geun-hye under pressure to step down and faces criminal investigation for nepotism and other charges.

By Chae Jong-won and Lee Yong-gun

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]