'Supercycle' Battery Companies' Debt Ratio at 65%... Financial Soundness Also Stands Out (Comprehensive)

Rapid Growth with
Maintained Sound Financial Indicators
Secured Stable Investment Capacity

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

Choi Yoon-ho, President and CEO of Samsung SDI. (Photo by Samsung SDI)

[Asia Economy Reporter Moon Chaeseok] The three major domestic battery companies, which have seen a boom with annual investments reaching trillions of won, have also received passing marks in managing financial soundness. It is evaluated that they are not only securing financial stability but also solidifying a strong position in future credit rating assessments.

According to the Financial Supervisory Service on the 10th, Samsung SDI's consolidated debt ratio for 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 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, and SK Innovation maintained a similar level 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 a 'consolidated debt ratio below 150%'. A ratio under 100% is considered stable, and below 150% is also regarded as a meaningful figure.

According to LG and SK, the two companies plan to invest over 13 trillion won this year alone to strengthen 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.

Experts evaluate that considering the growth potential of the battery industry, the soundness indicators of the three companies are at a stable level. These soundness indicators include not only immediate financial stability but also a solid business portfolio spanning from batteries to materials and future profitability prospects. A battery industry insider said, "Financial stability factors such as debt ratio are reflected in credit rating evaluations, and since credit ratings are based on an overall assessment of company value, higher ratings will help with fundraising and enhancing shareholder value."

However, due to the impact of China's 'battery rise,' China holds a majority share of the global market (50.3% according to SNE Research), making it difficult to slow down investment pace. External risk factors such as delays in battery production schedules due to vehicle semiconductor supply shortages and sharp rises in raw material prices also need to be managed. Securing stable investment capacity is thus crucial, and maintaining the soundness indicators observed by the three companies is expected to act as a significant advantage in fundraising processes during emergencies.

The financial investment industry holds the view that if the three battery companies fail to maintain their market share in the global market, their credit ratings could be downgraded. This means that if they fall significantly behind Chinese companies in growth indicators, 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 global secondary battery market position ▲whether 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 ratings could be downgraded sequentially.

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