Cash Flow of Conglomerates
The cash flow of major business groups such as the Samsung Group, Hyundai Motor, Hanjin, and Hanwha is getting worse for different reasons. For example, it is investment for Samsung and Hyundai Motor, which own a large amount of cash, and is sluggish performance for Hanjin and Hanwha.
As of the end of the third quarter of this year, the combined cash and cashable assets of the 81 listed non-financial subsidiaries of the 10 major conglomerates including LG, SK, Lotte, Hyundai Heavy Industries, GS, and Doosan, were 75.7136 trillion won (US$71.5359 billion). The amount increased by 153.8 billion won (US$145.3 million) from the end of last year.
The amount increased by 1.3822 trillion won (US$1.3060 billion) to 13.5881 trillion won (US$12.8450 billion) for the affiliates of the SK Group, and by 757.3 billion won (US$715.9 million) to 7.9647 trillion won (US$7.5252 billion) for those of the LG Group. The sum increased in Lotte, Hyundai Heavy Industries, GS, and Doosan as well by 757.4 billion won (US$715.6 million) to 2.8109 trillion won (US$2.6558 billion), 300.6 billion won (US$284.0 million) to 1.8772 trillion won (US$1.7736 billion), 437.2 billion won (US$413 million) to 2.8859 trillion won (US$2.7280 billion), and 230.9 billion won (US$218.3 million) to 5.0386 trillion won (US$4.7606 billion), respectively.
Meanwhile, the amount decreased in Samsung, Hyundai Motor, Hanjin and Hanwha. The total went down by 9.73% to 21.8576 trillion won (US$20.6515 billion) in Samsung, 3.46% to 15.3314 trillion won (US$14.4930 billion) in Hyundai Motor, 26.70% to 1.9846 trillion won (US$1.8751 billion) in the Hanjin Group and 3.39% to 2.3741 trillion won (US$2.2443 billion) in the Hanwha Group.
Experts point out that the evaluation of their cash and cashable assets should factor into group-specific characteristics. The decrease in the asset amount of those with much cash or capable of cash creation should be considered to have to do with investment, but this is not so for those suffering from poor business results.
This means that the subsidiaries of Samsung have been aggressive in investment. The cash and cashable assets of Samsung Electronics decreased 6.79% to 17.5147 trillion won (US$16.5569 billion) between the end of 2012 and September 2013. Samsung Electronics made large investments this year to release the Galaxy S4, Galaxy Note 3, and Galaxy Gear, and to expand its memory semiconductor post-processing lines in Xian, Shaanxi in China.
The amount dropped by 22.33% for Hyundai Mobis, as it has been striving for the development of eco-friendly auto parts, intelligent components, and multimedia technologies.
In the meantime, the Hanwha and Hanjin Groups are facing worse cash flow than before due to the business slowdown. Securities analysts say that their cash and cashable assets dropped for subsidies to affiliates and debt repayment. In the Hanjin Group, all of the subsidiaries witnessed such a drop this year with the only exception of the Korea Airport Service.
“Hanjin spent a lot of cash on debt repayment, and in order to support the business operation of its daughter companies,” said a stock market source, adding, “Thus, the cash flow situation is pretty adverse for it, at least for a while.” On a consolidated basis, Korean Air’s operating profits fell 43% year on year to 160.0660 billion won (US$151.2339 million). Hanjin Shipping went into the red during the same period.
Hanwha Chemical’s photovoltaic power generation business has posed a heavy burden on the entire Hanwha Group, too. According to KB Investment & Securities, Hanwha Chemical, the world’s third-largest solar power company, recorded an operating deficit of 252.70 billion won (US$238.76 million) last year, due to the supply glut in the market.