Korean producers increase sales, but report lower profits

Abstract

South Korean chemical producers recorded higher sales in 1997, but their profits were generally lower. Most firms would have reported losses if not for changes in reporting rules. One reason for the higher sales was a drop in the value of the Korean won at the end of 1997. South Korean chemical companies are mostly petrochemical producers that sell their product in U.S. dollars. A strengthening of the U.S. currency boosts sales in terms of the Korean won. Another factor that helped South Koreans was relatively strong demand from China, the main buyer of their chemical products. In terms of profitability, though, weakening prices meant that gross margins expressed in U.S. dollars were lower. Moreover, the slumping won increased repayment charges sharply for companies with foreign obligations. In fact, the foreign-exchange losses would have forced so many publicly listed companies to report net losses that the Korea Stock Exchange in late December relaxed financial reporting ...