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Manufacturing Sector Recorded the Worst Profit Year

Posted May. 16, 2002 09:14,   

한국어

The ratio of operating profit to sales, which indicates the profitability of the manufacturing sector, has recorded 5.5 percent last year, the lowest figure since the beginning of the survey in 1961. Three out of ten manufacturers could not even pay interests from the operating profit, and the manufacturers have gained mere four Won`s worth of the ordinary profit for each revenue of a thousand Won.

However, the survey results shows the companies` financial structures have improved since the financial burden has lowered with a low interest rate and the liability ratio fell remarkably.

According to the result of `the enterprise management analysis 2001`, which analyzed the financial accounts of 3,323 enterprises (including 2,175 manufacturers and 1,148 construction companies, whole sale/retailers, and transportation/telecommunications companies) and published on May 15 by the Bank of Korea (BOK), the ratio of operating profits to sales has recorded a historic low, 1.9 percent points lower than the previous year. The low figure resulted from the bigger share of fixed expenses such as labor cost or depreciation cost since the revenue increased a mere 1.7 percent due to the economic depression, which is the lowest figure, except in 1998 when it recorded 0.7 percent right after the foreign exchange crisis.

The manufacturers` interest coverage ratio, which divides the operating profit by the financial cost, recorded 132.6 percent, a drop of 24.6 percent points compared to the previous year. The number of manufacturers that could not pay the financial cost with operating profit, which means companies under the ratio of 100 percent of the interest coverage ratio, rose to 622, a share of 28.6 percent of the total manufacturers, which is an increase 2.3 percent compared to the previous year.

The ratio of the ordinary profit to sales in the manufacturing sector recorded 0.4 percent, a drop of 0.9 percent point compared to the previous year, which indicated a continually worsening trend. The ratio means the companies have earned four Won for each sales volume of 1,000 Won, a reduction of nine Won from the previous 11 Won. The surpluses of the ordinary profit margin mainly come from the improved non-operating accounts, which include the lower financial cost of 4.2 percent due to the low interest rate, the higher evaluation values of the equities and more disposal income due to the stock price hikes, and the reduction of exchange losses.

The debt-to-equity ratio of the manufacturing sector recorded 182.2 percent, a drop of 28.4 percent compared to the previous year and the lowest figure since 1967, which were due to the lower interest rate, capital conversion, debt pay-off, and others.



Sang-Chul Kim sckim007@donga.com