S. Korean firms see Q3 profitability rise

SEOUL, Dec. 1 (Yonhap) -- South Korean corporate profitability rose to the highest level in over a year in the third quarter, mainly because lower oil prices reduced costs, the central bank said Tuesday.

The average ratio of operating profit to sales, a key barometer of profitability,
reached 7.3 percent in the July-September period, up from 5.9 percent a year
earlier, the Bank of Korea (BOK) said in a report based on a survey of 1,496
companies. It marked the highest level since the second quarter of 2008 when the
ratio came in at 7.6 percent.
"Corporate profitability rose last quarter on reduced cost burdens, and given
industrial output numbers and robust exports, the trend is likely to continue
into the fourth quarter," Kim Kyung-hak, head of the BOK's corporate statistics
team, told reporters.
Sales by local firms, however, have yet to bounce back to pre-crisis levels,
although the pace of decline has eased, the bank added.
Sales declined 3 percent in the third quarter, slowing from a 4 percent fall the
previous quarter mainly because sales by tech firms and automakers rose. In the
second quarter, their sales declined by the largest margin in almost six years
amid slumping demand.
The ratio of pre-tax net income to sales, another gauge of profitability, stood
at 8.8 percent last quarter, compared with 3 percent the previous year, as gains
by the Korean currency helped lower the value of foreign exchange losses, the BOK
added.
The won fell about 14 percent against the U.S. dollar in the third quarter
compared with a year earlier. A weaker won raised the value of foreign exchange
losses and debts when they were converted into the Korean unit. But the currency
gained nearly 4 percent on-quarter against the dollar in the July-September
period.
Local firms' financial soundness also strengthened as their cash flow improved,
the central bank said. The average ratio of debt to equity reached 104.2 percent
as of the end of September, down from 109.1 percent three months earlier due to
an increase in equity capital, it added.
The South Korean economy grew 2.9 percent in the third quarter from three months
earlier, the fastest quarterly expansion in more than seven years, on improving
domestic demand and brisk exports.
sooyeon@yna.co.kr
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