South Korea's firms drop in profitability for four years in a row

Special Report:Global Financial Crisis

SEOUL, Feb. 3 (Chinese media) -- The profitability of South Korea's top-ranking companies made a drop for four consecutive years, from2004 to 2008, amid the unfavorable global business environment and harsh competition with neighboring countries, the Korea Herald reported on Tuesday.

The data from the nation's financial data provider, FnGuide, shows that the ratio of operation profit to revenue, a key proxy of profitability, for 40 largest companies has been declining since 2004. The operating profit ratios fell off from 12.07 percent in 2004, to 9.48 percent in 2005, 7.8 percent in 2006, 7.74 percent in 2007, and finally to 6.72 percent in 2008.

"Low profitability is not just a passing phase. Improvement seems unlikely this year as global demand slackens amid a worldwide recession," said Lee Jong-woo, head of research at HMC Investment Securities Co..

Volatility in won-dollar exchange rate, soaring price of raw materials, threats on competitiveness from rival companies in China were attributed to the low profits of South Korean firms, according to Lee.