Cashflow of Conglomerates
Major Korean conglomerates such as Samsung Group and Hyundai Motor Group have been quite resistant to the global economic recession. Meanwhile, the resistance of mid-sized conglomerates is on the decline. With the STX, Woongjin and Tong Yang Groups being driven out of the market one after another, the financial community is busy finding fault with them and de-leveraging, while focusing on their risks.
It has been found that the 68 affiliates of the 10 major business groups in Korea which have submitted their quarterly reports recorded a cash flow from operating activities of 71.1543 trillion won (US$67 billion) during the first three quarters of this year. The amount increased by 10.3919 trillion won (US$9.7843 billion) compared to the same period last year. The 10 conglomerates, or chaebol, are Samsung, LG, Hyundai Motor, SK, Hyundai Heavy Industries, Doosan, GS, Lotte, Hanjin, and Hanwha.
The figure implies that the companies further concentrated on investment and marketing with over 70% of the national GDP of Korea being derived from export. It can be interpreted as a higher international standing of Korean companies in the global markets, too.
According to the Institute for Industrial Policy Studies, Korea ranked ninth in its national brand value assessment, like it did last year, but the value increased by US$300 billion. On the Fortune’s list based on sales for last year, Samsung Electronics climbed six notches to 14th year-on-year, with gross sales of US$178.6 billion. SK Holdings took 57th place, Hyundai Motor Company 104th and POSCO 167th. A total of 14 Korean companies put their names on the Fortune 500 list in 2012.
Cash flow by financing activities stood at just 6.3907 trillion won (US$6.017 billion), approximately 10 trillion won less than a year earlier. This means that they were very aggressive in handling financial risks. However, they were not slow to make investments, either. The total investments of the 10 listed groups amounted to 77.4731 trillion won (US$72.9 billion) during the first three quarters, 7.6118 trillion won (US$7.1667 billion) more than a year ago.
They showed some gaps though. Cash outflow from operating activities exceeded cash inflow in no less than 33 of the subsidiaries, which means 48.52% of the affiliates had difficulty making profits. Samsung Electronics earned 36.44321 trillion won (US$34.31241 billion) through operating activities to record a more than 10 trillion won increase, whereas the amount dropped by 1.2427 trillion won (US$1.1700 billion) for Hanwha and 1.0856 trillion won (US$1.0221 billion) for GS Engineering & Construction.
It was Samsung Electronics that made the largest investment. Its cash outflow from investing activities reached 34.0389 trillion won (US$32.0487 billion). Hanwha, Hyundai Motor, SK Hynix, SK, and LG Display were aggressive in investment, too.