Cash flow problems hit conglomerate-based exporters on global factors such as euro crisis


More and more large-sized companies are facing risks of deterioration in financial soundness, mostly hit by external factors like the eurozone debt crisis.

Among them are SK Telecom, SK Hynix, LG Display, LG Uplus, LG Innotek, LG International Corp., Cheil Industries, CJ CheilJedang Corp., Hanwha Chemical, Hyundai Hysco, Hyundai Merchant Marine and Doosan Heavy Industries, according to FnGuide, a financial info service provider.

FnGuide also included several state-owned firms like Korea Electric Power Corp. and Korea Gas Corp. on the list of those facing liquidity problems.

Citing analyses from a group of brokerage houses, FnGuide predicted that the firms will suffer cash shortages in the coming months.

Korea Electric Power Corp. posted a free cash flow of 581 billion won ($505 million) last year. But the state-run company is projected to face a cash shortage of 6.8 trillion won in the latter half of 2012.

This indicates that KEPCO will have to raise 6.8 trillion won from other sources through activities such as issuing bonds to finance its business activities.

Korea Gas Corp. will also likely suffer from a cash shortfall of 2.3 trillion won.

SK Telecom is expected to see its coffers short by 1.6 trillion won in cash, Hanwha Chemical with 184.4 billion won, Hyundai Merchant Marine with 172.1 billion won and LG Display with 163.1 billion won.

Analysts at major brokerage firms attributed their projections to worse-than-expected export growth due to difficulties in export destinations such as the European Union, the United States and China.

Apart from the eurozone fiscal crisis, they cited the lack of a strong recovery in the U.S. market and a lackluster performance by the Chinese economy.

Under the current situation, many enterprises are actively liquidating their assets to secure as much cash as possible, as economic uncertainties drag on.

According to the Financial Supervisory Service, the amount of assets Korean firms sold during the first half nearly doubled from the previous year.

The regulatory data showed that local firms sold a total of 780.7 billion won worth of tangible assets in the six-month period, compared with 404.8 billion won over the same period last year.

Firms are required to disclose sales of assets that exceed a certain portion of their total assets.

Hite Jinro Co., the nation’s No. 2 beer producer, recently sold one of its office buildings for 134 billion won in an attempt to improve its financial standing.

SK Networks, a unit of SK Group, is reportedly considering selling its office buildings for 150 billion won to 180 billion won.

The Korea Development Institute said Sunday that “uncertainties still prevail in the local economy, although the downside risk trend has slowed, aided by increased production in the service and mining industries in recent months.”

Private consumption rebounded, with demand for durables surging, the state-controlled research center said in a monthly report.

The consumer sentiment index fell to 101 in June from 105 in May due to the growing uncertainties in the domestic and global economies, the report said.

By Kim Yon-se (kys@heraldcorp.com)