LG Chem Achieves Record High Performance... Q3 Operating Profit of 902.1 Billion KRW

Record High Operating Profit and Sales
Improved Petrochemical Profitability Due to Increased ABS Demand
Strong Battery Segment Performance Driven by Tesla and Other Electric Vehicle Demand

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] LG Chem achieved record quarterly sales and operating profit in the third quarter of this year despite the COVID-19 pandemic situation. Demand for high value-added acrylonitrile butadiene styrene (ABS) increased significantly more than expected, improving profitability in the petrochemical sector, and strong growth in electric vehicle demand, including China's Tesla Model 3, led the battery division to perform well, driving the overall results. As a result, sales rose back to the 7 trillion won level after a year.

LG Chem announced its preliminary third-quarter earnings on the 12th, reporting an operating profit of 902.1 billion won, a 158.7% increase compared to the same period last year. This 'surprise performance' exceeded the market forecast of around 710 billion won. It is the first time LG Chem's quarterly operating profit has surpassed 900 billion won. The previous record was 831.3 billion won in the first quarter of 2011 during the petrochemical boom. ▷Related article page 5

Sales were preliminarily estimated at 7.5073 trillion won, surpassing the previous quarterly record of 7.451 trillion won set in the fourth quarter of last year. The operating profit margin improved to 12.02%, compared to 3.06% in the first quarter and 8.24% in the second quarter.

LG Chem's strong performance in the third quarter amid uncertainties such as COVID-19 and the US-China trade dispute is attributed to expanded production margins in the petrochemical sector and improved results in the battery division. Although segment-specific results were not disclosed on the day, securities analysts estimate that the petrochemical sector, including ABS and other major products, posted operating profits of around 720 billion won with expanded sales and profitability.

The battery division's operating profit is estimated to have remained at a similar level to the previous quarter, around 150 billion won. Despite a turnaround to losses in the energy storage system (ESS) business, performance in medium-to-large batteries for electric vehicles and small batteries for home appliances is analyzed to have improved.

Kang Dong-jin, a researcher at Hyundai Motor Securities, said, "In the fourth quarter, the electric vehicle division's performance is expected to improve further due to new battery models and normalization of yield rates at the Poland plant, and ESS is also expected to normalize. Regarding small batteries, most of the volume will be reflected in the fourth quarter as Apple's new product launch was delayed this year, so battery business results are expected to improve significantly compared to the third quarter."

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