Leaders Index Survey
Shinsegae, Lotte, CJ, Harim, Hanjin, etc.
Float Ratio Below 100%
The financial soundness of the top 30 domestic conglomerates deteriorated over the past year. LS, Hanwha, and Kakao saw significant increases in their debt ratios. However, cash flow from investing activities nearly doubled, indicating increased future investments despite challenging internal and external business conditions.
On the 27th, Leaders Index, a corporate analysis research institute, analyzed the financial soundness of 301 companies affiliated with the top 30 groups by assets based on their first half reports. The total debt in the first half was recorded at KRW 3,704.9673 trillion, an increase of KRW 411.7783 trillion from KRW 3,293.1889 trillion in the first half of last year. During this period, the debt ratio also rose by 7.6 percentage points from 171.7% to 179.3%.
The current ratio, which evaluates how well a company can handle short-term debt, also worsened. The current assets of the top 30 groups increased by KRW 75.5992 trillion from KRW 1,341.1302 trillion last year to KRW 1,416.7294 trillion this year. However, current liabilities due within one year increased more significantly by KRW 102.39 trillion (from KRW 955.6979 trillion to KRW 1,058.0879 trillion). The current ratio dropped by 6.4 percentage points from 140.3% to 133.9%. Among the top 30 groups, 21 had a current ratio below 200%.
Excluding financial companies, LS showed the largest increase in debt ratio among the top 30 groups. Its debt rose by KRW 19.5687 trillion over the year from KRW 25.4141 trillion in the first half of last year to KRW 44.9828 trillion. The debt ratio also surged by 86.2 percentage points from 194.6% to 280.8%. Among LS affiliates, LS Networks’ debt ratio jumped from 130.2% to 939.7%, and E1’s from 171.1% to 529.8%.
Hanwha followed, with total debt increasing by KRW 32.025 trillion from KRW 222.4423 trillion to KRW 254.4673 trillion. Its debt ratio rose by 48.3 percentage points from 355.1% to 403.4%.
Kakao’s debt ratio, although below 100%, increased by 15.8 percentage points over the year from 70.7% to 86.5%, with debt rising by about KRW 1 trillion.
Groups with decreased debt ratios included Celltrion (46.5% → 20.6%), HD Hyundai (186.8% → 178.9%), and Doosan (132.6% → 125.5%).
Liquidity among the top 30 groups became more vulnerable. The current ratio indicates a company’s ability to meet its payment obligations; the higher, the better the financial liquidity. Generally, a current ratio above 200% is considered stable.
As of the first half of this year, Samsung, Youngpoong, HMM, and Nonghyup (non-financial affiliates) were the only groups among the top 30 with a current ratio above 200%. The remaining 26 groups had ratios below 200%.
The group with the lowest current ratio was Shinsegae. Although it increased by 4.8 percentage points compared to the previous half-year, it remained at 73.0%. Lotte (83.8%), CJ (85.3%), Harim (86.8%), Hanjin (89.3%), Hanwha (91.7%), and S-Oil (97.1%) also had current ratios below 100%.
Despite the deterioration in financial soundness, the top 30 groups expanded future investments. In the first half of last year, due to poor performance, the surplus cash flow?calculated by subtracting cash flow from investing activities (KRW 84.9948 trillion) from cash flow from operating activities (KRW 84.5708 trillion)?was negative KRW 4.239 billion. This indicated cautious investment with expenditures roughly equal to earnings.
In the first half of this year, improved performance led to an increase of KRW 29.0142 trillion in cash flow from operating activities, reaching KRW 113.585 trillion. Cash flow from investing activities nearly doubled to KRW 168.9446 trillion. The surplus cash flow significantly decreased to negative KRW 55.3595 trillion, indicating that companies actively invested in the future.
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