In 2016, Korea’s state-run companies achieved a vast improvement in financial soundness as their joint efforts with the government paid off.
According to an analysis conducted by the Korean Ministry of Strategy and Finance, the aggregate liabilities of 329 non-bank public corporations that disclosed the financial statements for 2016 fell KRW 5.4 trillion year on year to KRW 499.4 trillion, while their combined equity increased KRW 22.8 trillion to KRW 299.4 trillion.
The decline in liabilities was attributed to disposition of non-core assets, as in the cases of Korea Deposit Insurance Corporation (KDIC) shedding its Woori Bank shares and of Korea Electric Power Corporation (KEPCO) selling its land where the headquarters was located, coupled with an increase in operating income.
Consequently, the debt-to-equity ratio reached 167% in 2016, down 16%p from a year ago or 53%p from the peak of 220% in 2012.
The equity increase resulted from additional government investments as well as operating income expanding KRW 3.6 trillion due to a reduction in cost of goods sold and interest expenses each attributable to low oil prices and low interest rates. In particular, KEPCO’s operating income benefited from low oil prices, which greatly contributed to the overall profitability of state-run companies.
The analysis also found that such programs as mid- to long-term financial management plan, pre-feasibility study, subsidiary control and management evaluation helped reduce the debt, improving financial health of the companies. This outcome is expected not only to make each of them more financially sustainable, but also to have a positive effect on the national economy as a