
Turning to deficit in petrochemical sector, improving profitability of advanced materials and energy solutions
AI-generated summary
LG Chem is a comprehensive chemical company with major businesses such as petrochemicals, advanced materials, and life sciences, as well as subsidiaries LG Energy Solution and Farm Hannong.
LG Chem recorded an operating profit of 561.2 billion won in the third quarter of this year, a decrease of more than 17% compared to the same period last year.
The petrochemical division, the main business, turned into a loss due to the burden of rising oil prices, but the profitability of the advanced materials division and subsidiary LG Energy Solutions improved.
LG Chem [051910] announced on the 5th that its operating profit in the third quarter of this year on a consolidated basis was provisionally calculated to be 561.2 billion won, a 17.4% decrease from the same period last year.
Sales amounted to 15.496 trillion won, an increase of 34% compared to the same period last year. The net loss was 600 billion won, turning into a deficit.
LG Chem Chief Financial Officer (CFO) President Cha Dong-seok said, “Despite uncertainties such as rising oil prices and increased volatility in raw material prices, the company’s performance maintained a stable level thanks to the improved profitability of advanced materials and energy solutions.”
The petrochemical division recorded sales of 4.7547 trillion won and an operating loss of 175.6 billion won. The company turned into a loss due to the narrowing of major product spreads (price difference between products and raw materials) due to reverse lagging of raw materials, increased transportation costs, and the impact of the exchange rate decline.
In the fourth quarter, we plan to continue efforts to improve profitability by expanding sales of high value-added products such as IPA (isopropyl alcohol) for semiconductor cleaning and SSBR (high-performance synthetic rubber) for electric vehicle tires, reducing costs, and optimizing inventory management.
The advanced materials division recorded sales of KRW 1.0726 trillion and operating profit of KRW 39.7 billion. Sales and profitability improved compared to the previous quarter thanks to the increase in battery material volume and reflection of one-time profits, as well as the solid performance of electronic materials such as semiconductors and automobiles.
The fourth quarter is expected to maintain a similar level of profitability as the third quarter due to the base effect resulting from the reflection of one-off profits.
The life science division recorded sales of 337.3 billion won and operating profit of 23.2 billion won. Sales and profitability fell due to a decrease in export shipments and an increase in R&D costs.
In the fourth quarter, sales and profitability are expected to improve due to the concentration of exports such as vaccines and the impact of receiving additional advance payments following the signing of a license-out change agreement for rare obesity treatments.
Subsidiary Farm Hannong recorded sales of 103 billion won and operating loss of 20.7 billion won. Sales and profitability decreased slightly due to the base effect from the advance purchase of fertilizer in the first half of the year.
In the fourth quarter, sales and profitability are expected to decrease compared to the previous year due to a decrease in fertilizer sales and an increase in research and development (R&D) costs.
Subsidiary LG Energy Solutions recorded sales of KRW 9.6434 trillion and operating profit of KRW 756 billion. Profitability improved due to improved operating rates in Europe, continued increase in cylindrical volume, and stabilization of energy storage system (ESS) production in North America.
LG Chem is using the financial resources secured through the sale of its shares in LG Energy Solutions for growth investment, strengthening its financial soundness, and returning shareholders, and plans to review various ways to improve shareholder value in connection with the sale of its shares in the future.
President Cha Dong-seok said, "We will further strengthen profitability and business competitiveness through expansion of high-value-added businesses based on customer collaboration and transformation of business structure, and we will continue to pursue various shareholder return plans by considering growth investment and financial soundness in a balanced manner."
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Various measures to increase shareholder value in connection with the sale of LG Energy Solutions shares will be reviewed.
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The advanced materials division in the fourth quarter is expected to maintain a similar level of profitability as the third quarter.
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Life science sector sales and profitability expected to improve in the fourth quarter
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