Polarization of Interest Expenses Among Top 10 Groups... SK and LG Increase, POSCO and Samsung Decrease

[Asia Economy Reporter Park So-yeon] It has been revealed that the listed subsidiaries of the top 10 conglomerates paid a total of over 10 trillion won in interest expenses last year. A polarization phenomenon in interest expenses emerged between corporate groups actively continuing new investments and those focusing on risk management amid the COVID-19 situation.

On the 29th, Asia Economy compiled the interest expenses paid by 93 listed subsidiaries of the top 10 conglomerates last year, totaling 10.037 trillion won. This figure decreased by about 223.3 billion won (2.18%) compared to the previous year (10.2603 trillion won).

By group, the increase in interest expenses was notable among groups such as LG, SK, and Hyundai Motor Group, which are actively continuing new investments related to mobility.

The group with the highest interest expenses was SK Group, which paid a total of 2.8297 trillion won across 18 subsidiaries. This is about a 2.51% increase from the previous year (2.7604 trillion won). This is interpreted as a result of raising large-scale funds through bond issuance for expanding new businesses such as electric vehicle battery production plants in recent years. SK Group bears a significant borrowing burden due to investment capital needs. It is actively pursuing new businesses centered on bio, pharmaceuticals, mobility, and global energy sectors.

Next was LG Group, which paid a total of 1.2694 trillion won in interest expenses across 13 listed subsidiaries. This represents a sharp increase of 13.76% compared to the previous year (1.1159 trillion won). Since 2017, LG Chem has been raising large-scale funds at low interest rates in the low 1% range every early year by entering the market. In 2019, when the corporate bond market was hot, it raised 1 trillion won at once, and earlier this year, it planned to issue a total of 1.2 trillion won in corporate bonds, including 820 billion won in ESG bonds.

Hyundai Motor Group paid 1.2471 trillion won in interest across 11 listed subsidiaries, a 2.71% increase from the previous year (1.2142 trillion won).

Conversely, Samsung Group, which had good performance but was passive in investment due to issues with the group head, and POSCO Group, which was hit hard by weak demand and soaring raw material prices, reduced their interest expenses. This is interpreted as focusing on risk management rather than new investments.

Samsung Group spent a total of 1.0521 trillion won in interest expenses across 12 listed subsidiaries last year, a 12.89% decrease from the previous year (1.2077 trillion won). Following were Lotte (841.54 billion won), POSCO (747.4 billion won), Hanwha (708.1 billion won), Hyundai Heavy Industries (518.3 billion won), GS (510.4 billion won), and Shinsegae (312.9 billion won) in order.

The average interest coverage ratio of the 93 listed companies of the top 10 groups slightly increased from 6.88 times two years ago to 7.05 times last year.

The interest coverage ratio is an indicator showing how much of a company's income is spent on interest expenses, calculated by dividing operating profit by financial costs (interest expenses). An interest coverage ratio of 1 means that the money earned from operating activities is just enough to pay interest, leaving no surplus. A ratio greater than 1 means that the money earned from operating activities covers financial costs and leaves a surplus.

The company with the highest interest coverage ratio last year was Samsung Group at 37.12 times, improving by 42.71% from 26.01 times the previous year. This reflects Samsung Group's situation of having large operating profits but being passive in large-scale deals such as mergers and acquisitions (M&A).

LG Group's ratio was 7.74 times, a 56.04% increase from 4.96 times the previous year. Although LG Group's interest expenses increased by 13.76% (153.5 billion won) compared to the previous year, operating profit increased by 77.68% (4.2962 trillion won), raising the interest coverage ratio.

Hyundai Motor Group's ratio was 6.38 times, a 23.21% decrease from 8.32 times the previous year. Following were GS (4.31 times), POSCO (4.0 times), Hanwha (3.42 times), Lotte (1.75 times), SK (1.65 times), and Shinsegae (1.49 times) in order.

This content was produced with the assistance of AI translation services.