Korean to prioritize deleveraging in 2024: Survey

Deleveraging is expected to be the biggest buzzword for major South Korean companies next year as uncertainty grows at home and abroad.

According to a survey conducted by Maeil Business Newspaper on the chief financial officers (CFOs) and finance executives at 37 large companies about their financial management plans for next year on Wednesday, 64.9 percent said improving financial strength, including debt reduction, is their top priority goal for next year.

Twelve companies, or 32.4 percent, said they will increase cash reserves in case of a liquidity crisis, and 27 companies, or 73 percent, said they would prioritize paying down debt if opportunities for investment and improving financial soundness came at the same time.

Even if interest rates were to fall, companies’ finances were expected to become tighter than this year given the current high level of interest rates and the possibility of a global economic downturn.

Twenty-two companies, or 59.5 percent, said their cash flow would worsen next year while only three firms, or 8.1 percent, said they would be better off next year.

Most of them attributed worsening corporate financing conditions to higher financing costs from prolonged high interest rates at 69.2 percent and poor performance amid the economic downturn at 76.9 percent.

However, despite the uncertainty, 15 of the companies surveyed were optimistic about improving their performance next year. The responses likely came in anticipation of a recovery in earnings led by exports, including those of semiconductors.

“The combination of high interest rates, a strong dollar, geopolitical risks, and a delayed economic recovery in China is increasing uncertainty about the economic outlook for next year,” said a finance executive at one of the large companies. “We are forced to focus on reducing debt rather than entering new businesses through mergers and acquisitions.”