S. Korean firms' Q1 profitability growth hits five-year high

16:21, June 11, 2010      

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South Korean corporate profitability rose at the fastest rate in over five year in the first quarter of 2010, on the back of the local currency's gain, the central bank said Friday.

According to a report by the Bank of Korea (BOK), the ratio of local companies' pre-tax net earnings to sales hit 9.2 percent in the first quarter, rising from 2.3 percent tallied a year ago.

The figure marked the sharpest hike since the first quarter of 2005 when the ratio came in at 9.8 percent, the BOK said.

The rise in corporate profitability came as firms' cost burdens reduced and the local currency won's ascent against the U.S. dollar reduced the conversion value of foreign debts, an official at the BOK said, adding that the trend is likely to continue in the second quarter, considering given corporate performances and industrial output numbers.

Sales, meanwhile, increased by 17.4 percent on-year in the first quarter. Tech firms and carmakers made the largest contribution to it, the BOK said.

Local firms' cash flow, a gauge on their financial soundness, improved, with the average debt-to-equity ratio reaching 101 percent as of March, down from 101.7 percent a quarter ago, the BOK said.

The data came as South Korea reported a surprise growth rate of 2.1 percent on-quarter in the first quarter, thanks to improving domestic demand and brisk exports.



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