Arab Today, arab today s korea\s corporate profitability worsens in q2
Last Updated : GMT 17:37:11
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S. Korea\'s corporate profitability worsens in Q2

Arab Today, arab today

Arab Today, arab today S. Korea\'s corporate profitability worsens in Q2

Seoul - Yonhap

South Korean corporate profitability slowed down to a six-month low in the second quarter on high raw material prices and the local currency\'s gains, the central bank said Tuesday. The average ratio of operating profit to sales, a key barometer of profitability, reached 5.5 percent in the April-June period, down from 6.3 percent in the first quarter, the Bank of Korea (BOK) said in a report based on a survey of 1,491 companies. The second-quarter reading marked the slowest growth since 4.8 percent in the fourth quarter of last year, the BOK said. \"The growth of corporate profitability slowed last quarter on a rise in commodity prices. Companies\' asset growth sharply eased as some firms sold their short-term cashable assets to repay debt,\" Kim Young-hun, head of the BOK\'s corporate statistics team, told reporters. Korean firms\' total assets grew a mere 0.9 percent in the second quarter from three months earlier, easing from 2.5 percent growth in the first quarter and the lowest growth since a 0.6 percent contraction in the second quarter of 2009. Their sales expanded 13.1 percent last quarter from a year ago, decelerating from 16.9 percent in the first quarter and the slowest gain since 7.5 percent in the fourth quarter of 2009, the BOK said. The South Korean economy is losing its growth momentum as the sputtering global economy is hurting exports, which account for about 50 percent of the economic output. Asia\'s fourth-largest economy grew 0.9 percent on-quarter in the second quarter from 1.3 percent in the first quarter. In the second quarter, the Korean won gained 2.7 percent to the dollar, compared with three months earlier. The slowed profitability curtailed companies\' room to cover financial costs, the central bank said. The average interest coverage ratio, which measures a firm\'s capacity to cover financial costs with operating profit, came in at 432 percent in the cited period, down from 502.2 percent in the first quarter. Exporters mostly fared better than domestic-focused firms, indicating that overall corporate growth was driven by bigger companies. The BOK said exporters were more profitable and healthier than domestic-focused companies, but the gap between them in terms of profitability and revenue was reduced from three months earlier. Sales by exporters grew 14.2 percent last quarter from a year ago from 20.9 percent in the first quarter while non-exporters saw their sales gain 12 percent, easing from 13.1 percent in the preceding quarter.

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