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Biz News Korea(Eng)

1 out of 5 Kospi-listed firms did not earn enough to pay interest last year

Collected: 2016.04.14

Distributed: 2016.04.15

Source: Go Direct

One out of five South Korean companies listed on the main Korea Composite Stock Price Index (Kospi) bourse did not earn enough even to cover for the interest on their debt last year. Four companies bearing the name of the country’s largest conglomerate - Samsung C&T Corp., Samsung SDI Co., Samsung Heavy Industries Co. and Samsung Engineering Co. - were among the worst-performing Kospi members.

According to FnGuide’s study on the interest coverage ratios (ICR) of 658 Kospi-listed companies that disclosed business performance for last year, 149 companies, or 22.6 percent, reported the times interest earned - or a measurement on margin of safety a company has for paying interest with its earnings - under the dangerous threshold of 1. If a company’s ratio is below 1, it is not generating revenues enough to pay its interest expenses and would therefore have to borrow more to meet debt obligation.

Thirty-four, or 5 percent, freshly dipped below the danger zone last year, including four Samsung units.

Samsung C&T’ ratio sank to 0.37 last year from 3.27 in 2014. The other three - Samsung SDI, Samsung Heavy Industries and Samsung Engineering - reported operating losses last year.

The interest coverage ratio of the shipbuilding, energy facility and service industries hovered in the minus territory for the last two consecutive years. Shipping, machinery, computer and related devices, transport infrastructure and communications equipment sectors showed ratios of below 1.

By Bae Mi-jung

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