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One third of S. Korean manufacturers face bankruptcy

(Xinhua)
Updated: 2008-10-17 10:18

SEOUL -- Over one third of publicly listed South Korean manufacturing firms recorded deficits in cash flow in the first half of the year and face risk of bankruptcy, despite making accounting profits, the Korea times reported Friday.

According to Korea Investment and Securities (KIS), such cash deficit can occur even though companies post profit in the income statement when companies sell products on credit or their customers fail to pay bills.

The portion of "profitable money losers" for 2008, which is as high as 35.1 percent is even worse than during the Asian financial crisis.

The portion was 23.8 percent in 1997 when the Asian meltdown hit the country before subsiding to 13.5 percent and 13.6 percent in the following years. Before this year, it has never reached 20 percent ever since.

"Lots of domestic companies seem to be suffering from a lack of liquidity. Combined with the ongoing global credit crunch, this will increase pressure on cash-hungry companies," said Lee Jung- min, an economist at KIS.

"Considering the extremely high ratio of such cash-losing firms, I am afraid some of them will go under in the near future regardless of how healthy their operations are," Lee said

He added that small firms may face greater trouble than the large companies due to their lack of ability to raise money.