Foreign-invested firms found more profitable

The Korea Herald 2000. 6,17

    Foreign-invested companies were much more profitable and financially healthier than domestic companies in 1999, the Bank of Korea said in a report yesterday.

    The ratio of current income to sales for foreign-invested companies operating here more than doubled to 11.7 percent last year, from 5.2 percent in the previous year, the central bank said.

    In contrast, the ratio for domestic companies stood at a minus 1.1 percent in 1998, compared with a minus 4.2 percent, posting the negative figure for three straight years, it said.

    The figures mean that foreign-invested companies reaped a profit of 117 won per 1,000 won worth of goods sold, while domestic counterparts suffered a loss of 11 won.

    Foreign-invested firms refer to companies in which foreigners hold stakes of 50 percent and more.

    The central bank attributed foreign-invested firms' improved profitability to cuts in costs of goods sold, depreciation and financing. In particular, the inclusion of Samsung Electronics Co. (SEC) in the category of foreign-invested firms helped boost their profitability, it said. If SEC were excluded, the ratio of current income to turnover for foreign-invested companies would drop to 8.1 percent, the central bank said.

    Foreign-invested companies' debt-to-equity ratios, meanwhile, averaged 110.4 percent at the end of last year, down from 194.4 percent a year earlier and far lower than domestic companies' debt-to-equity ratio of 230.8 percent, the central bank said. The average debt-to-equity ratio was even much lower than 158.8 percent for U.S. companies and 173.6 percent for Japanese firms.

    Foreign-invested firms current ratio, or current assets divided by current liabilities which represents their ability to repay short-term debts, amounted to 97.3 percent as of the end of last year, far higher than 85.4 percent for domestic companies.

    The central bank also said that foreign-invested companies accounted for 18.5 percent of the domestic manufacturing sector's turnover in 1995, 21.2 percent of its value added and 9.7 percent of its workforce. (KYS)