South Korea’s five largest companies by market capitalization in the main Kospi market have lost 20 trillion won ($15.3 billion) in their cash flow in the second quarter from the previous three-month period amid deteriorated earnings and fund-raising conditions.

According to earnings statement analysis by Maeil Business News on Sunday, the top five Kospi members reported net cash outflow of 4.9 trillion won in April-June period, compared with net inflow of 15.08 trillion won in the first quarter. SK hynix and Samsung Biologics bolstered their cash flow while Samsung Electronics, LG Energy Solution (LGES), and LG Chem reported retreat in theirs over the last three-month period.

The analysis showed that the companies saw a net cash outflow of about 13 trillion won in the second quarter, when counting out 7 trillion won in loans that were not spent in the first quarter.

A company’s cash flow is a key index that measures financial soundness. It reflects a company’s ability to carry out investment or repay debt. The bottom line could suffer due to higher financing costs, further eating up the cash ammunition.

When net cash inflow falls, companies refrain from borrowing to manage the financial account and invest less.

Their cash net outflow from financing activities reached 3.45 trillion won in the second quarter, compared with net cash inflow of 10.87 trillion won in the first quarter. Financing activity cash flow covers loan dues and dividend payout. The decline suggests corporate tightening during rising interest rate environment.

Battery major LGES saw cash flow dwindle by more than 10 trillion won over the cited period.

Overall investment also fell.

The top five Kospi companies spent 23 trillion won in capital investment in the second quarter, down from 24.81 trillion won in the first quarter. Samsung Electronics and Samsung Biologics upped capex by 2.88 trillion won and 960 billion won, respectively, but others cut back.

Cash flow from operations at the five companies declined except for Samsung Electronics, the analysis showed.

Cash flow from operating activities increased slightly to 17.18 trillion won in the second quarter from 16.37 trillion won in the first quarter but this was because Samsung Electronics’ cash flow jumped nearly 40 percent to 14.14 trillion won from 10.45 trillion won. Cash flow at SK hynix fell nearly 11 percent to 4.59 trillion won from 5.16 trillion won while other companies generated loss, which means that they spent more cash than their earning from operation.

LGES blamed Covid-19 lockdowns across China and prolonged global supply disruptions for the weakened profitability in the second quarter despite higher revenue.

By Kang In-seon and Lee Eun-joo

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]