CEO Score, Corporate Debt Scale and Dependence Survey
LN F Rises by 36.1%P
EcoPro BM and POSCO Future M Also Increase by Over 10%P
Due to the electric vehicle chasm (Chasm: temporary demand stagnation), the debt dependency of battery companies such as L&F, EcoPro BM, and POSCO Future M has surged, according to a recent investigation. Petrochemical companies like SK Chemical and Hanwha Solutions have also seen an increase in debt due to expanded capital expenditures (CAPEX) and sluggish market conditions. Debt dependency refers to the ratio of a company's debt to its assets. A higher ratio increases financial costs, negatively impacting company profitability.
According to CEO Score, a corporate data research institute, among the top 500 companies by sales, 279 companies (excluding financial firms) that submitted semi-annual and business reports from Q4 2022 to Q2 2023 recorded a debt dependency of 28.0% as of Q2 2023. This is a 0.6 percentage point increase compared to Q4 2022. The total debt of these companies in Q2 reached KRW 1,040.9461 trillion, up KRW 11.0688 trillion from Q4 2022.
By company, the battery manufacturer L&F saw its debt dependency rise sharply from 30.1% in Q4 2022 to 61.7% in Q2 2023, an increase of 31.6 percentage points?the largest jump. Other companies with significant increases include Shinsegae Construction (10.9% → 36.6%), Kolon Global (18.2% → 43.4%), EcoPro BM (28.1% → 47.3%), SK Chemical (18.4% → 33.4%), and POSCO Future M (32.0% → 46.9%).
The expansion of debt dependency was particularly notable among battery material companies. CEO Score analyzed that "while companies increased borrowing to fund large-scale facility expansions such as factory construction, the impact of the electric vehicle chasm slowed performance improvements, preventing them from offsetting the increased debt." Debt dependency also rose among petrochemical firms. CEO Score explained, "Despite worsening profitability due to oversupply and export sluggishness, companies increased investments to promote non-chemical and eco-friendly new businesses, leading to higher debt dependency."
The company with the largest decrease in debt dependency was SK Shieldus, dropping from 61.0% to 2.2%. This was followed by SK Networks (53.1% → 28.5%), SK Incheon Petrochem (55.7% → 35.4%), HD Hyundai Samho (19.8% → 1.0%), CJ CGV (75.8% → 57.8%), Hyundai Rotem (24.0% → 8.6%), and Hwasung Corporation (56.8% → 45.4%).
When narrowing the scope to Q2, the company with the highest debt dependency was Hyosung Chemical at 79.4%. It was followed by Korea Gas Corporation (70.6%), SK Rent-a-Car (70.4%), Farmsco (69.3%), Lotte Rental (64.9%), HD Hyundai Chemical (64.8%), Deutsch Motors (64.2%), and Lotte Global Logistics (62.1%).
The company with the lowest debt dependency was Semes at 0.1%, followed by Hyundai Engineering (0.3%), POSCO DX (0.6%), Orion (0.6%), KEPCO KPS (0.8%), HD Hyundai Samho (1.0%), LX Semicon (1.3%), and Kangwon Land (1.3%).
By industry, the petrochemical sector showed the highest increase in debt dependency, rising 4.5 percentage points from 30.2% in Q4 2022 to 34.7% in Q2 2023. This was followed by IT and electronics (12.8% → 15.3%), public enterprises (48.3% → 50.2%), steel (23.0% → 24.3%), and telecommunications (31.8% → 32.2%).
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
