The free cash flow of South Korea’s top 100 businesses in terms of market cap decreased a whopping 35 percent from last year. This is because they greatly increased their investments, though their performance dramatically improved this year.
According to South Korea-based corporate evaluation website CEO Score (CEO Park Joo-geun) on December 13, the total free cash flow of 97 out of top 100 enterprises in terms of market cap, which have data to compare with last year, came to 34.15 trillion won (US$31.44 billion) as of the end of the third quarter this year, down 34.8 percent from 52.39 trillion won (US$48.23 billion) over the same period last year.
The free cash flow represents the cash that a company is able to generate after spending the money on various expenses, taxes and facility investment. It is an indicator that shows how sound company’s financial conditions are.
The decrease in the free cash flow of the top 100 companies this year is due to the significant increase in investment. The cash flow of business activities slightly increased by 0.7 percent to 91.96 trillion won (US$84.67 billion) this year, but their capital expenditures, or investment, surged as much as 46.6 percent to 59.51 trillion won (US$54.79 billion).
Fifty nine out of 97 companies surveyed, or 60.8 percent, saw their free cash flow drop. In addition, 15 companies have a negative free cash flow. The free cash flow of Korea Electric Power Corp. and S-Oil Corp. plummeted by 3.42 trillion won (US$3.15 billion) and 1.34 trillion won (US$1.23 billion), respectively, in the past year. Hyundai Engineering and Construction Co. saw the figures decrease 784.6 billion won (US$722.33 million), LG Electronics Co. 685.6 billion won (US$631.19 million), Hanmi Hanmi Pharmaceutical Co. 493.1 billion won (US$453.97 million), AmorePacific Corp. 388.3 billion won (US$357.48 million) and Hanwha Corp. 236.6 billion won (US$217.82 million).
Samsung Electronics Co. had the biggest free cash flow at 5 trillion won (US$4.6 billion). The company was the only one with 5 trillion won (US$4.6 billion) of free cash flow but the figure dropped a whopping 45.1 percent, or 4.11 trillion won (US$3.78 billion), from last year. Samsung Electronics’ cash flow of business activities jumped as much as 46.6 percent, or 7.52 trillion won (US$6.92 billion). However, its free cash flow showed a downturn as its investments for the acquisition of tangible and intangible assets grew a whopping 159.6 percent, or 11.58 trillion won (US$10.66 billion).