CONGLOMERATES FACE FINANCIAL DIFFICULTIES

[Anchor Lead]

Businesses are faced with multiple challenges caused by the soaring prices of raw materials as a result of inflation and high currency exchange rates. Many are also experiencing difficulties with financing, as the capital market is struggling. Major corporations are operating in an emergency regime and curtailing their investments.

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With prices of raw materials expected to rise further and demand for products to decline, LG Electronics plans to set up a task force next month to cope with the crisis. The team will consist of employees dispatched from each department and will be tasked with crisis response.

[Soundbite] (LG Electronics staff) : "We’re operating a task force to be able to respond to rapid changes in the business climate swiftly."

SK also views the current situation as a crisis. Chairman Chey Tae-won, while meeting with the CEOs of SK's affiliates, said he wants to turn this crisis into an opportunity. He called for preparing for a bigger leap forward after the crisis by finding a new solution. Financing problems stemming from concerns over economic recession due to high inflation and the weakening Korean currency as well as the Legoland scandal remain as a stumbling block. LG U+ and Hanwha Solutions, which have high credit ratings, issued corporate bonds last week, but not all of them have been sold. They have managed to avert an immediate crisis by having securities companies acquire the unsold bonds. However, firms with lower credit ratings are increasingly giving up on issuing their corporate bonds.

[Soundbite] Cho Young-moo(LG Business Research) : "Even the public sector, regarded as safe, is struggling these days leading companies and the private sector as a whole to give up on bond issuance."

More businesses are opting to postpone investment and tighten their belts. SK Hynix, Hanwha Solutions and Hyundai Oil Bank have already scrapped their investment plans. Hyundai Motor has decided to cut its 2022 investment by 300 billion won to secure liquidity. A poll conducted by the Federation of Korean Industries on 600 companies shows the business survey index for November is expected to plunge to the lowest level in 25 months. The corporate finance forecast was found to be the worst, pointing to the need to devise measures.