Top 3 Domestic Battery Companies Also Earn 'Passing Grade' in Financial Soundness

Last Year's Q3 Consolidated Debt Ratios
Samsung 64.9% LG 156% SK 153.4%

Maintaining Sound Financial Indicators Amid Super Cycle Growth
Securing Stable Investment Capacity

[Asia Economy Reporter Moon Chaeseok] The three major domestic battery companies, which have seen annual investments reach trillions of won amid a booming market, have also received high marks for their financial soundness management. They are evaluated to be solidifying their position not only in securing financial stability but also in future credit rating assessments.

According to the Financial Supervisory Service on the 10th, Samsung SDI's consolidated debt ratio in the third quarter of last year was 64.9%. Although this is 3.7 percentage points higher than 61.2% at the end of 2020, it is still well below the 'under 100%' level, which is considered stable across industries. LG Energy Solution lowered its ratio by 7.6 percentage points from 163.6% at the end of 2020 to 156% in the third quarter of last year, while SK Innovation maintained a similar level, moving from 149% to 153.4% during the same period.

The credit ratings and outlooks assigned by NICE Credit Rating for the three companies are Samsung SDI 'AA·Stable', SK Innovation 'AA·Stable', and LG Energy Solution 'AA+·Stable'. According to NICE, one of the factors for upgrading credit ratings is maintaining a 'consolidated debt ratio below 150%'. A ratio under 100% is considered stable, and below 150% is also regarded as a significant figure.

According to LG and SK, the two companies plan to invest over 13 trillion won this year alone to strengthen their secondary battery production capacity. LG announced that LG Energy Solution will invest 6.3 trillion won in the battery sector, and LG Chem will invest 1 trillion won in the materials sector, totaling 7.3 trillion won this year. SK plans to invest a total of 6 trillion won this year, with SK On investing 4 trillion won in the battery sector, SK IET (SK IE Technology) investing 1 trillion won in the separator sector, and SK Nexilis investing 1 trillion won in the copper foil sector. Due to the impact of China's 'battery rise', China has taken over more than half of the global market share (50.3% according to SNE Research), making it difficult to slow down investment speed. They also need to manage considerable external risk factors such as delays in battery production schedules due to the automotive semiconductor supply shortage and the sharp rise in raw material prices. In this context, securing stable investment capacity is crucial, and maintaining the soundness indicators observed by the three companies is expected to act as a considerable advantage in fundraising processes in case of emergencies.

Experts evaluated that considering the growth potential of the battery industry, the soundness indicators of the three companies are at a stable level. These indicators include not only immediate financial stability but also a solid business portfolio extending from batteries to materials and future profitability prospects.

A battery industry insider said, "Financial stability items such as debt ratio are reflected in credit rating evaluations, and since credit ratings are based on an overall assessment of company value, receiving a high rating will help with fundraising and enhancing shareholder value."

However, the burden for the three companies lies in the fact that if they fall significantly behind Chinese companies in growth indicators such as maintaining market share in the global market, it could negatively affect their soundness indicators as well. NICE Credit Rating listed the main monitoring factors for the three companies' credit ratings as ▲changes in the global secondary battery market position ▲whether the profit scale centered on automotive batteries expands ▲whether profitability of small batteries and electronic materials is maintained ▲improvement level of operating performance in the energy storage system (ESS) sector, and quality issues such as fire accidents. If these indicators falter, it means that the rating outlook and credit rating could be downgraded sequentially.

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