SEOUL, Nov. 3 (Korea Bizwire) – A typical excuse by large corporations that “we have no cash to invest” turns out one of the biggest lies they make. Even amid the prolonged recession and worsening financial results, top conglomerates are swamped with cash in their coffers. A study said the cash balance held by Korea’s top-ten business groups was 125 trillion won.
According to Chaebul.com, a website tracking corporate performance, the cash asset balance held by these ten groups was 125.41 trillion won as of the end of September this year, up 15.1 percent (16.42 trillion won) from 108.99 trillion won at the end of last year. Cash assets are defined as the sum of cash, cashable assets, and short-term financial assets that can be sold easily.
This is borne out by recent data released by the Bank of Korea on November 2. The balance of short-term financial assets that can be turned into cash within one year reaches 257.8 trillion won. This is 15.9 percent (35.4 trillion won) higher than that in 2011 from 222.4 trillion won. The main reason the short-term financial asset balance has increased rapidly, the Bank of Korea said, was the corporations were unable to find adequate investment destinations all the while they see their retained earnings balloon.
By individual company, the cash balance of Samsung Electronics rose 22.9 percent to 66.95 trillion won as of the end of September this year from 54.50 trillion won at the end of 2013. The company, however, suffered a series of setbacks this year, posting the sales revenue for the nine-month period of this year at 153.48 trillion won, down 9.4 percent from the same period last year. Its operating profit dropped 30.7 percent to 19.74 trillion won during the same period.
The cash balance of Hyundai Motor has increased 15.2 percent (3.31 trillion won) to 25.06 trillion won from 21.75 trillion won in nine months. Its nine-month sales revenue rose 0.5 percent to 65.68 trillion won but operating profit fell 9.7 percent to 5.67 trillion won. LG Display saw its sales revenue and operating profit fall more than 10 percent from the nine-month period last year, but its cash balance increased 1.8 percent (40 billion won) to 2.36 trillion won during the same period.
Other large corporations such as LG Electronics, Hyundai Mobis and SK Hynix enjoyed a large increase in their cash balance thanks to excellent performance for the first nine months of the year. LG Electronics posted its nine-month operating profit rose 50.2 percent from a year ago and its cash balance increased 11.3 percent (300 billion won) to 2.95 trillion won as of the end of September. The cash balance of Hyundai Mobis and SK Hynix also rose more than 30 percent to 3.70 trillion won and 3.39 trillion won each.
In contrast, other companies such as Hyundai Heavy Industries, POSCO, and SK Innovation saw their cash balance fall precipitously due to worsening operating profit results. Hyundai Heavy Industries, which recently announced a radical downsizing measure to cut 30 percent of its executive payroll, reported its cash balance shrank 7.8 percent (470 billion won) to 5.56 trillion won as of the end of June this year from 6.03 trillion won at the end of 2013. POSCO’s cash balance declined 23.0 percent (1.65 trillion won) from 7.18 trillion won at the end of 2013 to 5.53 trillion won at the end of September.
The cash balance for SK Innovation decreased 5.1 percent (150 billion won) to 2.81 trillion won at the end of September from 2.96 trillion won at the end of last year. Its cumulative operating profit for three quarters of this year fell 83.2 percent from the same period last year.
By Sean Chung (firstname.lastname@example.org)