Their results were worse than all listed companies, which posted a combined profit of Bt145 billion in the first quarter, 8-per-cent more than the same period in 2005, according to the Stock Exchange of Thailand (SET). Their sales increased 23 per cent from the same period last year as well.

The BOT also reported that investments in fixed assets, excluding investment made by large companies, began thinned due to the economic slowdown and increasing risk factors from oil prices, inflation and political uncertainty.

However, investments by large companies, particularly those in the manufacturing sector, continued increased from the prior quarter.

"The increase in oil prices, inflation and political uncertainty have significantly affected investors' decision making," said the report.

The BOT, however, found that the private sector had the potential to increase investment if the risk factors were to ease. In addition, financial leverage has continuously declined, indicating that the business sector is cautious about borrowing. Instead, companies are relying more on their high retained earnings, which were an average 19.2 per cent of assets as March 31.

The report said less financial leverage reduced risks from interest-rate hikes. Satisfactory profit levels also helped companies maintain their ability to repay debts.

Profits were nine times interest expenses on average, higher than an average of 3.2 times in 1996 the year before the financial crisis set in.

The improving ratio of earnings to interest expenses was because average earnings before interest and taxes had increased at faster rate than interest rates.

The average debt-to-equity ratio declined because of decreasing debts and rising shareholder equity as a result of higher retained earnings.

Anoma Srisukkasem

The Nation