By Kang Seung-woo
Listed small- and medium-sized enterprises (SMEs) struggled with cash shortages in the first half of this year amid the faltering economic recovery, a non-profit organization said Monday. The nation’s top-10 business groups added more cash to their wallets during the same period.
According to the Korea Listed Companies Association (KLCA), the cashable assets of Korea’s 632 listed companies stood at 48.13 trillion won ($40.76 billion) as of the end of June, compared with 52.94 trillion won at the end of last year, a 7.6 percent contraction.
In addition, the cashable assets per company also took a downturn in the cited period from 82.4 billion to 76.2 billion won.
Cashable assets cover cash, bank deposits, cash equivalents and other short-term financial instruments that could be readily turned into cash within three months.
The KLCA said that among 128 firms that saw their cashable assets drop by more than 50 percent, only 10 companies, including NHN, the Internet industry giant that operates Naver (www.naver.com) and Hangame (www.hangame.com), and Hyundai Department Store were the only companies listed as ``big businesses.’’
The cashable assets of 78 SMEs were short of 1 billion won, while 19 smaller players failed to reach the 100 million won mark.
Unlike cash-strapped SMEs, the top 10 business groups posted a subpar 5 percent decline.
Hanwha Group increased 179.5 percent in cashable assets for six months, while POSCO and Hyundai Heavy Industries posted 78 and 52 percent increases, respectively.
But Samsung Group dropped 33.4 percent, with its flagship unit Samsung Electronics down 32.1 percent. Hanjin Group and Hyundai Motor Group also posted a loss.
In terms of cashable asset size among the top 10 firms, Hyundai Motor Group topped the list with 7 trillion won, followed by LG Group at 3.92 trillion won and Samsung Group at 3.16 trillion won, with their combined assets reaching 24.65 trillion won, more than 50 percent of the total assets.
Observers say companies’ aggressive investment in expectation of a steady economic rebound in the second half ended up with a cash shortage due to the sluggish economy.
“There were prevailing optimistic views on the economic recovery earlier this year, so local firms made an active investment. But the European debt crisis and slumping U.S. economy have prevented companies from bearing fruit,” said a Seoul-based economist.
In addition, banks’ restrictions on loans to SMEs spurred the current lack of cash.
As of the end of August, KB Kookmin Bank’s lending to smaller companies dipped by 132.2 billion won from the previous month, while Shinhan Bank and Woori Bank also reduced their loans by 449 billion won and 454.1 billion won, respectively.