South Korean companies suffered a setback in their sales amid sluggish demand at home and abroad in the first three months of the year, but their profitability continued to improve, central bank data showed Thursday.

In a survey conducted by the Bank of Korea, local firms with over 12 billion won ($10.27 million) in assets said their sales dropped 2 percent in the first three months of the year from the same period last year.


The survey was conducted on 3,065 select companies between May 2 and June 10.

The drop in sales marked a slowdown from a 4.7 percent on-year decline in the first quarter of 2015.

Large companies continued to see their sales shrink, though the rate of decline slowed to a 2.9 percent on-year drop in the first quarter from a 5.5 percent cut a year earlier.

Small and medium-sized enterprises posted a 2.1 percent expansion in their sales, however, marking a turnaround from a 0.6 percent drop in the same period last year, according to the BOK.

Sales of manufacturing companies shrank 3.3 percent on-year in the first quarter, while those in the service sector saw their sales drop only 0.2 percent, apparently indicating problems facing local manufacturers due to slowing exports.

South Korea's exports have fallen every single month since the start of last year.

Despite a cut in sales, local companies saw their profitability improve.

The average operating-to-sales margin of local companies came to 5.6 percent in the first quarter, up from 5.2 percent a year earlier. Their average net profit before tax reached 6.2 percent of sales, compared with 5.6 percent tallied in the first quarter of 2015.

The companies' financial stability slightly improved as their assets grew 0.5 percent from three months earlier, while their debt to equity ratio remained unchanged at 101.4 percent, according to the BOK. (Yonhap)