South Korea’s corporate profitability improved in the second quarter from a year earlier as the economic recovery helped raise local firms’ sales growth, the central bank said Monday.
The average ratio of operating profit to sales, a key barometer of profitability, came in at 5.5 percent in the second quarter, up from 4.7 percent in the previous year, the Bank of Korea said in a report based on a survey of 1,755 companies.
Sales rose 1.4 percent on-year in the second quarter, a turnaround from a 0.7 percent on-year decline three months earlier.
But down from a 5.3 percent on-year growth in revenues in the second quarter of 2012.
The data came as the Korean economy grew 1.1 percent on-quarter in the second quarter, the fastest gain in more than two years, on increased fiscal spending and monetary stimulus.
The BOK’s 2013 growth estimate was revised up to 2.8 percent while the government has now forecast the local economy to grow 2.7 percent this year.
The average interest coverage ratio came in at 468.6 percent in the second quarter, up from 362 percent the previous year as a long streak of low rates eased burdens to cover financial costs, the BOK said.
The ratio measures a firm‘s capacity to cover financial costs with operating profit.
The portion of companies whose interest coverage ratio stayed below 100 accounted for 29.1 percent, down from 36.6 percent in the second quarter of 2012, indicating that financial conditions facing marginalized companies somewhat improved.
A reading below 100 indicates that a company does not have the capacity to cover financial costs with its earned income. (Yonhap News)
