Japanese companies have tightened their belts through significant restructuring measures, including workforce reductions, since the onset of the Covid-19 pandemic, while Korean companies appear to have merely gone through the motions of restructuring.

Selling, general and administrative (SG&A) expenses of South Korea’s major companies surged by 25 percent over the past three years, while their Japanese counterparts saw a reduction of 10 percent, according to an analysis. SG&A expenses cover a range of supplementary costs, such as rent, marketing, and wages. These expenses often serve as a gauge of the intensity of corporate restructuring during times of crisis.

On Tuesday, Maeil Business Newspaper compared the financial statements of leading Korean and Japanese companies in four sectors: electronics, automobiles, healthcare and batteries, based on data from Bloomberg and the Financial Supervisory Service.

The analysis focused on five major South Korean businesses, including Samsung Electronics Co., Hyundai Motor Co., Kia Corp., Samsung Biologics Co. and LG Energy Solution Ltd. The Japanese counterparts examined included Sony Group Corp., Toyota Motor Corp., Takeda Pharmaceutical Co. and Panasonic Holdings Corp.

The analysis revealed that the South Korean companies spent a combined 16.86 trillion won ($13.23 billion) as SG&A expenses during the January-March period of this year. In contrast, Japanese companies spent 15.57 trillion won during the same period, 1.31 trillion won less than their South Korean counterparts.

As the burden of expenses increased, South Korean companies trailed Japan in terms of net profit margin, a vital profitability indicator. Japan’s net profit margin averaged 5.2 percent in the first quarter, surpassing South Korea’s 4.9 percent. Notably, just three years ago, South Korean companies boasted a higher net profit margin of 5.1 percent versus Japan’s 4.9 percent.

Market watchers attribute the reversal in net profit margin between the two countries to a combination of factors, including business restructuring, cost-saving efforts, labor union tendencies, and interest rate discrepancies.

Although Japanese companies initially outspent their South Korean counterparts in SG&A expenses in the aftermath of the pandemic crisis, the subsequent restructuring initiatives displayed a contrasting picture. Over a span of three years, South Korean and Japanese leading companies saw 25.4 percent growth and 10.4 percent decline, respectively, in such expenses.

South Korean companies expanded their business footprint by launching new businesses while keeping their existing business structures intact, resulting in a rapid surge in SG&A expenses.

By Moon Il-ho and Minu Kim

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