Profits are going down.
More than 10 percent of Korean information and communications technology (ICT) companies are in danger with their profitability, growth potential and debt structures showing no signs of improvement.
The Institute for Information & Communications Technology (IITP) classified 41 out of the 353 ICT companies listed on the Korean stock market into the category of companies at risk. They recorded negative sales and profit growth rates along with an interest coverage ratio of 100 percent or less between 2013 and the first half of this year. The number of such companies had been 28, or 8.3 percent of the total, in 2011 and 2012.
Out of the 353 total companies, 97 posted a negative sales growth rate during the 18-month period, while 74 showed a decline in the operating-profit-to-sales ratio. The interest coverage ratio was 100 percent or less in no less than 108 companies.
In the first half of 2014, the listed ICT companies recorded an average sales growth of 12.2 percent, 75.3 percentage points down compared to the peak year of 2007, and 14.9 percentage points down compared to the recession during 2009. During the period, they showed a business profit rate of negative 4.0 percent to show a 3.4 percentage point decline from a year ago. The median value of these firms’ interest coverage ratios was 182 percent, about half of the minimum optimum level.
