The ratio of local companies' pre-tax net income to sales, a key barometer of profitability, reached 9.2 percent in the January-March period, sharply up from 2.3 percent a year earlier, the Bank of Korea (BOK) said in a report based on a survey of 1,536 companies. It marked the highest level since the first quarter of 2005 when the ratio came in at 9.8 percent.
"Corporate profitability improved last quarter as cost burdens fell and the won's ascent against the U.S. dollar reduced the conversion value of foreign debts," Kim Kyung-hak, head of the BOK's corporate statistics team, told reporters.
"Given corporate performances and industrial output numbers, the trend is likely to continue into the second quarter."
Sales by local firms grew 17.4 percent in the first quarter from a year ago, mainly because revenues by tech firms and automakers sharply gained, the BOK said. They marked the fastest expansion since a 28.6 percent increase in the third quarter of 2008.
The report came as the South Korean economy chalked up a surprise 2.1 percent on-quarter expansion in the first quarter on the back of improving domestic demand and brisk exports.
Amid the economic recovery, the Korean currency jumped an average 23.7 percent to the greenback in the first quarter, compared with the previous year. A stronger won decreases the value of foreign exchange losses and debts when they are converted into the Korean unit.
Local firms' financial soundness also strengthened as their cash flows improved, helping the debt ratio fall, the BOK noted.
The average ratio of debt to equity, a barometer of corporate indebtedness, reached 101 percent as of the end of March, down from 101.7 percent three months earlier.
The debt ratio has continued to decline after hitting a six-year high of 116.3 percent in the first quarter of 2009 in the aftermath of the global financial turmoil.//Yonhap
reporter
Park Sae-jin
swatchsjp@ajunews.com