LG Chem Q3 Operating Profit 860.4 Billion KRW... Petrochemical Sector Returns to Profitability

President Cha Dong-seok: "Despite Difficult Business Conditions... Steadfastly Fostering Three Major New Growth Engines"

LG Chem announced on the 30th that it recorded consolidated sales of KRW 13.4948 trillion and an operating profit of KRW 860.4 billion for the third quarter of this year. Compared to the previous year, sales decreased by 3.5% and operating profit by 5.6%. Compared to the previous quarter, sales decreased by 5.9%, but operating profit increased by 39.3%.

Excluding LG Energy Solution and others, LG Chem's direct business performance in the third quarter recorded sales of KRW 6.2777 trillion and an operating profit of KRW 116.1 billion.

Chad Dong-seok, LG Chem's Chief Financial Officer (CFO), said, "Despite the challenging business environment, we will overcome the crisis by enhancing fundamental competitiveness and continue sustainable growth through unwavering nurturing of the three new growth engines."

Exterior view of LG Chem Cheongju Plant mass-producing single-particle cathode materials [Photo by LG Chem]

Looking at the performance by business division, the petrochemical division recorded sales of KRW 4.4111 trillion and an operating profit of KRW 36.6 billion. Due to the rise in oil prices, the lagging effect (time lag in raw material input) and high value-added product groups such as materials for solar panel films (POE) and carbon nanotubes (CNT) maintained solid profitability, turning to a profit. In the fourth quarter, uncertainties such as continued high oil prices due to geopolitical risks are expected. LG Chem stated, "We will continue efforts to improve profitability by strengthening high value-added businesses and cost reduction activities."

The advanced materials division achieved sales of KRW 1.7142 trillion and an operating profit of KRW 129.3 billion. The battery materials business maintained overall sales volume as the decrease in shipments to Europe was offset by an increase in shipments to the United States, but profitability declined due to the drop in metal prices. In the fourth quarter, the downward trend in metal prices is expected to continue affecting product prices, leading to a decrease in sales and profitability of the battery materials business.

The life sciences division recorded sales of KRW 291.4 billion and an operating profit of KRW 15.2 billion. Sales slightly declined compared to the previous quarter due to a decrease in overseas shipments of some products such as vaccines and fillers, but operating profit turned positive due to significant sales growth and profit improvement following the acquisition of AVEO. LG Chem expects sales to increase in the fourth quarter with expanded shipments of key products such as diabetes and autoimmune treatments.

LG Chem Yeosu Plant
[Photo by LG Chem]

The battery subsidiary LG Energy Solution recorded sales of KRW 8.2235 trillion and an operating profit of KRW 731.2 billion. Although sales slightly decreased compared to the previous quarter due to weak demand in the European electric vehicle market and falling metal prices, profitability increased through efforts to strengthen product competitiveness, productivity, and cost improvements. Growth momentum is expected to continue in the fourth quarter, centered on the North American market.

Farm Hannong recorded sales of KRW 120.1 billion and an operating loss of KRW 15 billion. Despite the expansion of overseas sales of crop protection products, sales decreased compared to the same period last year due to price declines caused by deteriorating fertilizer market conditions. In the fourth quarter, sales and profitability are expected to improve through the expansion of overseas sales of specialty fertilizers.

LG Chem is attempting to improve its business structure through the sale of non-core businesses amid the global economic downturn and worsening petrochemical market conditions. Recently, it decided to sell the polarizing film and polarizing film materials business of the IT materials division's film business to a Chinese company for about KRW 1.1 trillion. During the earnings conference call, LG Chem stated, "The net assets related to the sale business are approximately KRW 170 billion to 180 billion," and "the disposal gain is about KRW 900 billion and is expected to be recognized in the fourth quarter or the first quarter of next year."

The company expressed its intention to continue pursuing various strategic options such as sales as part of sound portfolio management. LG Chem explained, "We are internally working on efficiency and structural improvements for some general-purpose businesses that lack competitiveness and are expected to face intensified competition with China," adding, "Although it is difficult to specify the businesses, we are prioritizing small-scale general-purpose businesses and intermediate raw material businesses, and simultaneously adjusting operations by production line and converting lines to high-profit products." Regarding plans to sell shares of LG Energy Solution, the company drew a line, saying, "There is a possibility if a strategic time to utilize it arises, but there are no concrete plans yet."

LG Chem Q3 Business Performance This Year [Image Source=LG Chem]

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