“Credit Checkpoint” is a column that assesses the credit rating risks of companies preparing to issue corporate bonds by examining their financial structure and cash flow. It evaluates a company’s short- and medium-term financial stability by focusing not only on the numbers in its financial statements but also on the quality and sustainability of its cash flow. We highlight key financial indicators and potential risk factors to help corporate bond investors and market participants assess a company’s creditworthiness from a more comprehensive perspective. <Editor’s Note>

[E-Daily Marketin Reporter LEE GEON-EOM ] Integrated logistics company HanjinTransportation(002320)is entering the public bond market amid expectations that its financial burden will ease following the completion of a major investment. Although the company continues its positive momentum with a “positive” credit rating outlook, attention is focused on whether it can meet investors’ expectations given the combination of a debt burden exceeding appropriate levels and the lingering effects of slowing earnings.

According to the financial investment industry on the 13th, HANJIN Logistics Corporation will conduct a bookbuilding process for 40 billion won in unsecured corporate bonds on the 14th. HANJIN Logistics Corporation was assigned a credit rating of “BBB+ (Positive),” as the company is viewed favorably for having brought major capital expenditures (CAPEX), such as the construction of the Daejeon Mega Hub Terminal, to the final stages. The “Positive” outlook indicates a high likelihood of an upgrade within the medium term.

Although HANJIN Logistics Corporation is continuing this positive trend, the prevailing view is that uncertainty still exists when looking solely at its fundamental financial health. This is because the recovery of its financial soundness is being delayed as profitability has actually slowed while its debt level remains above 2 trillion won.

According to the Financial Supervisory Service’s electronic disclosure system, HANJIN Logistics Corporation’s total debt as of the end of the first quarter of this year stood at 2.137 trillion won, a 0.4% increase from the end of the previous year (2.1285 trillion won). Cash and cash equivalents stood at 228.9 billion won, down 11.1% from 257.4 billion won at the end of the previous year, while net debt—which reflects the actual debt burden—rose 2% year-over-year to 1.9081 trillion won.

The debt-to-asset ratio—the proportion of total assets financed by debt—stood at 49.6%, significantly exceeding the appropriate level of 30%. This means that half of the company’s assets are financed by external debt. This is due to a sharp increase in lease liabilities resulting from the continuous expansion of leased facilities as the company secures new domestic and international logistics hubs and global fulfillment centers, even though large-scale facility investments came to a close in 2024.

Conversely, cash flow is showing signs of slowing. HANJIN Logistics Corporation’s cash flow from operating activities in the first quarter of this year recorded a net inflow of 34.2 billion won, but this represents a 26.8% decrease compared to the 46.7 billion won recorded in the same period last year. Free cash flow (FCF) also fell by 25.6% during the same period, from 39 billion won to 29 billion won. Analysts attribute the slowdown in cash flow to increased working capital burdens resulting from the settlement of accrued expenses, such as outsourcing and transportation costs.

This, combined with declining profitability in the core business, further eroded cash generation capacity. First-quarter revenue reached 779.0 billion won, a 6.8% increase from the same period last year, driven by strong global business performance—including increased K-Beauty exports—and revenue growth in the energy sector due to high oil prices.

However, the company posted a net loss of 2.3 billion won during the same period, shifting to a loss compared to the 500 million won profit recorded in the same period last year. Operating profit also fell 27.5% year-over-year to 19.8 billion won from 27.3 billion won. The operating profit margin stood at 2.5%, down 1.2 percentage points (p).

HANJIN Logistics Corporation’s poor performance stems from external uncertainties and intensifying competition in the industry. Due to escalating geopolitical risks in the Middle East, container throughput at major ports fell 14% year-over-year to 1.08 million TEU in the first quarter. In the parcel delivery segment, average selling prices declined as the proportion of low-priced, small-volume shipments increased and competition intensified. In addition, non-operating expenses—including interest expenses related to lease liabilities, 24.9 billion won in depreciation of right-of-use assets, and foreign exchange losses—increased, pushing the final net income into the red.

Choi Jeong-hyun, a senior researcher at Korea Ratings Corporation, stated, “While the burden of large-scale investment has eased with the completion of the Daejeon Mega Hub Terminal, long-term funding needs to strengthen business competitiveness—such as securing new logistics hubs—remain.” He added, “The key factors to monitor going forward are whether the efficiency gains from the Mega Hub Terminal and the growth of global operations can offset the pressures caused by falling parcel prices and declining cargo volumes.”