Big Firms' Combined Free Cash Flow Tumbles on High Interest Rates | Be Korea-savvy

Big Firms’ Combined Free Cash Flow Tumbles on High Interest Rates

This file photo shows the buildings of South Korea's major companies in Seoul. (Yonhap)

This file photo shows the buildings of South Korea’s major companies in Seoul. (Yonhap)

SEOUL, Dec. 14 (Korea Bizwire)Large companies in South Korea have seen their combined free cash flow (FCF) plunge nearly 80 percent over the past year amid concerns over a liquidity crunch stemming from high interest rates, a corporate tracker said Wednesday.

The total FCF of 268 out of the country’s top 500 listed firms by sales came to 14.2 trillion won (US$10.9 billion), up 77.2 percent, or some 48 trillion won, from a year earlier, according to CEO Score.

FCF refers to the cash left over after a company pays its taxes, operating expenses and capital expenditures. It serves as a measure of the firm’s financial conditions and ability to pay dividends at year-end.

Their total operating profit sank nearly 30 percent to 92.9 trillion won over the cited period, while their expenses rose 12.5 percent to 78.7 trillion won.

Out of the total, 148 companies, or 55.2 percent, had free cash flow increases, with the remainder registering declines.

The state-run Korea Electric Power Corp. posted the largest drop of 19.5 trillion won, with its free cash flow reaching minus 23.7 trillion won.

Global tech titan Samsung Electronics Co. saw its free cash flow plunge to 3.9 trillion won as of end-September from 10.7 trillion won a year earlier.

Meritz Securities Co.’s free cash flow soared to 10.2 trillion won from some 2 trillion won over the cited period, recording the biggest on-year gain.

South Korean corporations have been struggling to secure cash as the country’s central bank is keen to curb inflation by raising key interest rates.

Since August last year, the Bank of Korea has carried out six rate hikes with the country’s benchmark interest rate reaching 3.25 percent, leading to higher corporate borrowing costs.


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