LG Chem Enters 1 Trillion KRW Operating Profit Era... "Expanding US Battery Capacity to 140GWh" (Comprehensive)

"Seokhwa Boom Entered... Expecting 2 Trillion Sales Growth with 2nd NCC Operation"
"Difficult to Fully Internalize Complete Car Batteries... Will Increase Orders"
"30% Target for Anode Material Internalization"

[Asia Economy Reporter Hwang Yoon-joo] LG Chem has entered the era of quarterly operating profits exceeding 1 trillion KRW. It broke its record just two quarters after posting its highest-ever operating profit in Q3 last year (902.1 billion KRW). All business sectors including petrochemicals, advanced materials, and batteries delivered strong performances. The outlook for Q2 is also bright. The chemical industry has entered a boom period, and battery sales are expected to grow steadily.

◆ Operating profit surpasses 1 trillion KRW for the first time since establishment... Chemical business enters boom phase = LG Chem announced on the 28th that its consolidated Q1 operating profit increased by 584% year-on-year to 1.4081 trillion KRW. Sales during the same period rose 43.4% to 9.65 trillion KRW.

Looking at the Q1 results and Q2 outlook by business division, the petrochemical sector recorded sales of 4.4352 trillion KRW and operating profit of 983.8 billion KRW. Strong demand for key products driven by the favorable conditions in end industries such as home appliances, medical supplies, and building materials, along with spread expansion, led to solid results. In Q2, with the operation of Yeosu's 2nd NCC and the start-up of new capacity (Capa) for high value-added products such as NBL and CNT, sales growth and stable profitability are expected to continue. LG Chem stated in its Q1 earnings conference call, "Yeosu's 2nd NCC is scheduled to operate at 50% capacity this year and 100% from next year," adding, "We expect approximately 2 trillion KRW in annual sales growth from the 2nd NCC operation." They plan to focus on expanding packaging film products related to food, industry, and logistics.

The life sciences division recorded sales of 161.9 billion KRW and operating profit of 22.5 billion KRW. Profitability improved compared to the previous quarter due to expanded sales and strengthened market position of key products such as Gemiglo and Utrophin. In Q2, sales are expected to increase with the start of UNICEF supply of the new polio vaccine product, Upolio.

◆ Rapid growth in battery business... Proactive investment in advanced materials 'cathode materials' = LG Energy Solution (LG EnSol), which was spun off from the battery business, posted record quarterly sales and operating profit of 4.2541 trillion KRW and 341.2 billion KRW, respectively. Profitability improved due to expanded shipments of electric vehicle batteries, continuous yield improvements, and cost reductions. In Q2, sales growth of automotive batteries and cylindrical batteries is expected due to increased electric vehicle sales, and efforts to improve profitability through early stabilization of expansion lines and cost reductions will continue.

LG EnSol expressed its determination to become a global leader in the electric vehicle battery market. In the conference call, they said, "We plan to produce 140 GWh (gigawatt-hours) by 2025 through additional new bases in the U.S.," adding, "The U.S. production bases will expand production of both pouch-type and cylindrical-type batteries, and we also plan to secure new bases in Europe."

When asked about the automakers' battery internalization strategies, they replied, "It is difficult to internalize the entire volume of electric vehicle batteries," and "To hedge battery sourcing risks, cooperation with top-tier battery companies such as LG Chem will continue." They further explained, "Volkswagen Group's announcement of internalization plans means that orders will inevitably decrease to some extent in the mid-to-long term. However, the battery business has several entry barriers for new entrants, requiring accumulation of numerous core technologies, patents, and long-term mass production know-how."

The advanced materials division recorded sales of 1.1719 trillion KRW and operating profit of 88.3 billion KRW. Sales and profitability improved significantly compared to the previous quarter due to expanded production volume of cathode materials and recovery in demand for engineering plastic (EP) materials. In Q2, sales growth is expected to continue with the additional operation of new lines at cathode material plants and expanded shipments of OLED materials. LG Chem plans to double its cathode material production capacity to 80,000 tons this year from 40,000 tons last year. In the conference call, LG Chem explained, "We will maintain a 30% in-house ratio for cathode materials," and "By 2025, we aim to secure an annual production capacity of 260,000 tons, growing 6 to 7 times compared to the end of last year."

LG Chem CFO Vice President Cha Dong-seok commented on the earnings surprise, saying, "Despite uncertain external conditions, we restructured our business portfolio and laid the foundation to generate stable profits through continuous investment in new growth engines." He added, "We will nurture battery material businesses such as cathode materials and CNT as definite growth drivers, and actively invest in promising future ESG (environmental, social, governance) fields such as recycling and bio materials, while accelerating growth through collaboration with external partners."

This content was produced with the assistance of AI translation services.