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Korea's defense industry's sales log 1st decrease last year

Sales by the South Korean defense industry dropped 13.9 percent from a year ago to 12.76 trillion won (around $11.35 billion) last year, partly due to decreased exports and increased costs for research and development, an industry body said Friday.

According to the Korea Defense Industry Association, an umbrella body of 93 defense-related companies, it marked the first time that the industry saw its sale fall since it began to compile related data in 1983.

During the reported year, the industry's entire operating profit tumbled to 60.2 billion won from 535.2 billion won in 2014, 471 billion won in 2015 and 503.3 billion in 2016, with its operating profit-to-sales ratio staying at a mere 0.5 percent, compared with an average 7.6 percent for the entire manufacturing industry.

The industry fell to the red for the first time since it returned to profitability in 2002. Its net profit before taxes shrank to minus 69.6 billion won from 570.6 billion won in the previous year and its net profit plummeted to minus 109.1 billion won from 218.4 billion won.

Defense equipment sales by Korea Aerospace Industries Co., South Korea's sole aircraft manufacturer, fell by half from a year ago to 909.5 billion won on the back of sluggish exports, sending the company to a deficit with its net profit down to minus 261.8 billion won from 120.1 billion won.

The country's biggest arms producer, LIG Nex1, recorded a net loss of 8.6 billion won on sales of 1.76 trillion won due to its suspension of long-range radar business, putting it into the red.

The association attributed the fall to a move by the arms procurement authorities, including the Defense Acquisition Program Administration, to strengthen their punitive actions against the industry following corruption scandals in defense acquisition programs that involved the previous government.

Critics in the industry pointed to penalties arms producers are required by the administration to pay if they fail to complete projects within certain contract periods. (Yonhap)