40% of Manufacturers Bleeding in 3rd Quarter
By Na Jeong-ju
Staff Reporter
Four out of 10 South Korean manufacturers failed to earn enough pre-tax profits to cover interest costs in the third quarter, the Bank of Korea (BOK) said Monday.
In a survey of 1,540 listed firms on profitability, the bank said 37.4 percent of the firms were failing to generate profits large enough to repay their interest during the July-September period, compared with 34.1 percent in the previous quarter. The figure is the highest level since the central bank began compiling the data in the first quarter of 2003.
The survey also showed 42 percent of manufacturers couldn't cover interest payments in the third quarter, rising from 38.4 percent a quarter earlier. This indicates that more companies saw their profitability worsen in the third quarter, according to the bank.
However, the average Korean firm saw its profitability improve in the third quarter on the back of brisk exports and the stabilization of the local currency market.
The ratio of local firms' operating profit to sales, a key barometer of profitability, rose 1 percentage point on-quarter to 7.5 percent in the July-September period.
This means the local firms reaped an average 75 won from every 1,000 won in sales during the reported quarter, compared with 65 won in the previous quarter.
The ratio of pretax net income to sales, another barometer of profitability, also rose 0.8 percentage point on-quarter to 9 percent in the three-month period, the report showed.
``While exchange rates remained relatively stable, robust exports were behind the improvement,'' the BOK said in the report.
The firms' financial health improved for the second consecutive quarter. At the end of September, the ratio of debt to equity capital came to 85 percent, compared with 86.5 percent three months earlier.