Major Conglomerates' Cash Reserves Dwindle

    March 17, 2009 12:19

    As the global economic crisis continues, major Korean businesses are seeing their coffers grow empty. According to a notice issued by the Financial Supervisory Service on Monday, the size of the cash assets held by Korea's top 30 business conglomerates stood at W40.20 trillion (US$1=W1,440) as of the end of the fourth quarter of 2008. That is a 5 percent drop compared to the W42.37 trillion at the end of the third quarter of last year.

    Cash assets refer to cash, checks and current accounts as well as short-term financial products, including fixed and savings deposits.

    Over the period, the cash assets at Korea's top five business conglomerates -- Samsung Electronics, POSCO, SK Telecom, Hyundai Heavy Industries, and LG Electronics -- declined by more than 25 percent, from W16.54 trillion to W12.22 trillion. POSCO's dwindled by W835.1 billion (25 percent), LG Electronics’ by W316.2 billion (20 percent) and SK Telecom’s by W129.7 billion (19 percent).

    Shipbuilders were hit especially hard due to a drop in orders. Samsung Heavy Industries saw its cash assets drop by W1.30 trillion (38.3 percent) and Daewoo Shipbuilding and Marine Engineering by W1.13 trillion (49 percent). U.S. investment bank Morgan Stanley said in a recent report that the cash reserves held by Korea's big four shipbuilders are expected to drop by more than 70 percent, from W7.1 trillion last year to W2 trillion this year.

    Lee Jong-woo, a managing director at HMC Investment Securities, said businesses have seen profits shrink due to worsening financial performance, while their fixed expenses, including facilities investments, remained the same, leading to the drop. He added business will continue to experience tough times this year.

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