ID :
61486
Wed, 05/20/2009 - 10:08
Auther :
Shortlink :
https://www.oananews.org//node/61486
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Korean firms see 2008 profitability dip, suffer higher debt
SEOUL, May 20 (Yonhap) -- South Korean companies' profitability deteriorated to a seven-year low in 2008 as a weaker won led to foreign exchange losses, eclipsing their increased sales, the central bank said Wednesday.
The ratio of local companies' pre-tax net income to sales, a key barometer of
profitability, reached 2.9 percent last year, sharply down from 5.5 percent from
a year earlier, the Bank of Korea (BOK) said in a report based on a survey of
7,097 companies. The ratio marked the lowest level since 2001 when the rate
reached 1.7 percent.
"Last year, Korean firms' sales jumped due to higher product prices and brisk
exports. But their profitability worsened as the won's weakness resulted in a
foreign exchange loss, causing them to post a non-operating deficit," Park
Jin-wook, head of the BOK's corporate statistics team, told reporters.
Local firms' sales rose 19.1 percent last year, up from 9.5 percent the previous
year and marking the fastest growth since a 21.2 percent expansion in 1995, the
BOK added.
The Korean currency tumbled 25.7 percent against the U.S. dollar last year alone.
A weaker won raised the value of foreign exchange losses or debts when they were
converted into the Korean unit.
The won's weakness also dealt a blow to Korean companies' financial soundness as
foreign exchange losses increased.
The ratio of debt to equity reached 130.6 percent as of the end of 2008, up from
116.1 percent from the previous year, mainly because amid declining earnings,
corporate debt sales and foreign exchange debts sharply rose.
The ratio marked the highest level since 2003 when the rate stood at 131.3
percent, it added.
"Given falling net income, it seems that the growth pace of corporate debt is
fast," Park said.
The data comes as the South Korean economy narrowly averted a recession, or two
straight quarters of contraction, in the first quarter by growing 0.1 percent
from three months earlier. Asia's fourth-largest economy shrank 5.1 percent in
the last quarter of 2008.
Last year, the Korean economy grew 2.2 percent. The BOK predicted that the local
economy will contract 2.4 percent this year, the worst performance in 11 years,
due to falling exports and sluggish domestic demand.
The ratio of local companies' pre-tax net income to sales, a key barometer of
profitability, reached 2.9 percent last year, sharply down from 5.5 percent from
a year earlier, the Bank of Korea (BOK) said in a report based on a survey of
7,097 companies. The ratio marked the lowest level since 2001 when the rate
reached 1.7 percent.
"Last year, Korean firms' sales jumped due to higher product prices and brisk
exports. But their profitability worsened as the won's weakness resulted in a
foreign exchange loss, causing them to post a non-operating deficit," Park
Jin-wook, head of the BOK's corporate statistics team, told reporters.
Local firms' sales rose 19.1 percent last year, up from 9.5 percent the previous
year and marking the fastest growth since a 21.2 percent expansion in 1995, the
BOK added.
The Korean currency tumbled 25.7 percent against the U.S. dollar last year alone.
A weaker won raised the value of foreign exchange losses or debts when they were
converted into the Korean unit.
The won's weakness also dealt a blow to Korean companies' financial soundness as
foreign exchange losses increased.
The ratio of debt to equity reached 130.6 percent as of the end of 2008, up from
116.1 percent from the previous year, mainly because amid declining earnings,
corporate debt sales and foreign exchange debts sharply rose.
The ratio marked the highest level since 2003 when the rate stood at 131.3
percent, it added.
"Given falling net income, it seems that the growth pace of corporate debt is
fast," Park said.
The data comes as the South Korean economy narrowly averted a recession, or two
straight quarters of contraction, in the first quarter by growing 0.1 percent
from three months earlier. Asia's fourth-largest economy shrank 5.1 percent in
the last quarter of 2008.
Last year, the Korean economy grew 2.2 percent. The BOK predicted that the local
economy will contract 2.4 percent this year, the worst performance in 11 years,
due to falling exports and sluggish domestic demand.
