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2006-09-06 |
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Sales up, profits down for firms in 2005 |
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The Korea Herald, August 4, 2006
Korea's major business groups suffered a drop in net profit last year despite an increase in sales turnover, according to data released by the Financial Supervisory Service yesterday.
Nevertheless, these groups could lower their debt to equity ratio and increase investment using the large cash reserves they have accumulated over the past couple of years.
The aggregate revenue of the top 23 business groups with more than 5 trillion won ($5.2 billion) in assets stood at 518 trillion won in fiscal 2005, up 4.1 percent from a year earlier.
Their net profit, however, slid 11.2 percent to 29.7 trillion won and operating profit fell 12.8 percent to 40.7 trillion won.
The five biggest business groups - Samsung, Hyundai Automotive, LG, SK and POSCO - saw their combined sales rise 1.6 percent, while experiencing a 14.8 percent jump in net profit.
"In a business environment characterized by high oil prices and a weak U.S. dollar, the 4.1 percent increase in sales failed to translate into profit hikes. But their financial soundness has improved with debt to equity ratios down and current ratios up," the financial market regulator said in a press release.
The debt to equity ratio averaged 131 percent, down 11 percentage points from a year earlier. The top five business groups had a lower number of 106 percent, down 10 percentage points.
The average current ratio, current assets divided by current debts, increased to 112 percent, up 4 percentage points. The top five groups reported an increase of 3 percentage points to an average current ratio of 122.
"Despite a decline in operating expenses, the business groups spent more on facilities and intangible assets as investments for future growth," the FSS said.
The companies spent 33.2 percent more on intangible assets and 12.6 percent more on facilities, the official data shows.
Out of the total 23 business groups, 20 entities, including the nation's largest Samsung group, reported net profits, while a group of 21 businesses such as Dongbu Group also reported operating profits. Samsung Group accounted for 9.1 trillion won of the businesses' net profit.
Their assets accounted for 65.6 percent of the businesses' total assets worth 611 trillion won. Samsung Group's assets were tallied at 214 trillion won, or 35 percent of the total. The group of five's debt ratio, or a ratio of liabilities to equity capital, fell by 19 percentage points to 199 percent, the watchdog said.
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