LG Chem vows rebound after disappointing Q1
By Kim Yoo-chul
LG Chem, a global maker of chemicals products and rechargeable batteries used in electric vehicles, sustained a decline in operating profit during the first quarter due to rising costs and weak demand for petrochemical products in China.
The company’s operating profit of 459.9 billion won (about $403 million) in the three months to March represented a 45 percent annual decline, while its net income of 380.9 billion won was down 42 percent from last year. Its revenue of 5.75 trillion won represented a 4.8 percent year-on-year increase.
LG Chem officials claim that the company is enduring a temporary rough patch and things could only get better from now. Profitability will rebound in the coming months as the company has been shipping a larger volume of batteries to global auto giants like General Motors and Renault.
``The market for petrochemical products will get better too as the sector enters its favorable stretch for the year. There will be visible improvement in revenue and profit for the second quarter,’’ said LG Chem spokesman C.S. Song.
``The increasing demand for our batteries and film used in stereoscopic three dimensional (3D) televisions will also give us a boost.’’
LG Chem’s car battery client includes the global auto industry’s 10 biggest players and up-and-coming Chinese carmakers. The company ships film and other materials used in 3D televisions to electronic makers like LG Electronics, Sony, Panasonic and Phillips.
Kwon Young-soo, the head of LG Chem’s battery and film businesses, recently predicted a rebound for the company in its main markets in a conversation with The Korea Times.
LG Chem’s petrochemical division posted 4.49 trillion won in revenue and 360 billion won in operating profit for the first quarter. Its technology materials unit reported 760 billion won in revenue and just 77 billion won in operating profit.
Analysts were mixed about the prospects for LG Chem for the foreseeable future. However, there was agreement that the second quarter won’t be worse than the first.
``Batteries and film for 3D TVs will be the key drivers for the company,’’ said Hyundai Securities said in a report.
Oh Seung-kyu from Solomon Investment cut his target price for LG Chem as he was rather pessimistic about a complete recovery of the company’s petrochemical business, which remains its bread and butter despite all the headlines generated by its battery operations.
``However, it’s safe to say that the company’s profit will improve from this dismal first quarter.’’ Oh said.