Inventories at S. Korea’s top 10 heavyweights rise faster than revenue

2019.08.19 09:21:10 | 2019.08.19 09:21:49

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Inventories at South Korea’s 10 most valued companies rose faster than their sales in the first six months of this year, indicating a slowdown in their growth.

According to an analysis conducted by Maeil Business Newspaper on Sunday of first-half earnings reports released by top 10 listed companies by market value, their combined revenue in the January-June period stood at 287.74 trillion won ($238.1 billion), down 3.3 percent from the same period a year ago. Their inventory assets, however, which include goods and items of value sold for profit such as raw production materials, increased 16.7 percent to 81.4 trillion won over the same period.

In general, inventory asset level increases in par with overall revenue. When inventory level, however, grows significantly faster than revenue, it signifies unsold goods and items of value are piling up in their warehouse.

The analysis showed that SK Hynix Inc. saw the steepest fall in revenue among top 10 market capitalization companies. Its sales fell 30.7 percent on year to 13.2 trillion won in the first half of this year ended June, while inventories jumped 65.9 percent 5.59 trillion won during the same period.

The inventory asset of the country’s bellwether Samsung Electronics Co. rose 14.2 percent on year to 31.2 trillion won in the January-June period whereas its revenue fell over the same period.

Industry analysts noted that inventories at semiconductor companies are growing rapidly as global information technology companies that are major buyers of dynamic random-access memory (DRAM) chips are cutting down on investment amid escalating global trade tensions.

Revenue of Samsung C&T Corp. also fell 0.5 percent to 15.3 trillion won in the January-June period mainly due to a fall in overseas orders amid the protracted trade dispute between the world’s two biggest economies the U.S. and China and sluggish construction industry at home following the government’s tightened real estate regulations. The company’s inventory asset, however, increased 16.4 percent to 1.86 trillion won during the same period.

Korean battery maker Samsung SDI Co., meanwhile, saw the highest revenue growth among the top 10 companies by market value at 13.3 percent. Inventory asset, however, jumped 32.4 percent over the same period as component inventory piled up amid slowing down in IT demand due to the ongoing global trade war.

Hyundai Motor Co., Hyundai Mobis Co., LG Chem Ltd., Posco, and Kia Motors Corp. also saw their inventory asset grow faster than revenue, raising concerns over deteriorating cash flow in the second half of this year.

By Moon Il-ho and Lee Eun-joo

[ⓒ Pulse by Maeil Business Newspaper &, All rights reserved]