LG Chem announces Q3 earnings surprise with best-ever revenue, operating profit

LG Chem on Monday announced an earnings surprise for the third quarter of this year, posting the greatest quarterly revenue and operating profit in its history, as it prepares to break off its globally-leading battery unit later in the year.

The South Korean battery giant said in its preliminary earnings report that it would register 7.5 trillion won ($6.5 billion) in revenue and 902.1 billion won in operating profit in the July-September period.

If confirmed, the LG Chem will see an 8.8 percent growth in revenue and 158.7 percent spike in operating profit on-year. The revenue and operating profit figures would be the largest since the fourth quarter of last year and the first quarter of 2011, respectively.

“LG Chem’s record quarterly results have been propelled by strong performance in all business divisions: Petrochemicals, batteries, advanced materials and life sciences. The battery business continued to maintain profitability while the petrochemical business stayed robust thanks to the strong sales of major products such as acrylonitrile butadiene styrene and polyvinyl chloride colloquial,” an industry source said.

ABS, of which LG Chem holds the biggest global market share, is a highly-functional plastic with strong heat resistance and impact resistance, used for toys, cars, home appliances and IT devices. PVC, also known as vinyl, is a versatile thermoplastic used in products ranging from pipes, blood bags, tubes and cables.

“The coronavirus outbreak has driven up consumption for plastic products for both packaging and hygiene purposes, leading to higher demand for LG Chem’s major petrochemical products such as ABS, NB Latex and polyethylene,” a Hyundai Motor Securities analyst said.

The analyst also added that an improvement is expected for LG Chem’s advanced material business due to a growing demand for cathodes -- one of the four key components of lithium-ion batteries along with anodes, electrodes and separators. LG Chem, which supplies less than 30 percent of cathodes for batteries from its advanced material division, aims to raise the figure to 35 percent in the future. It also plans triple its cathode production capacity by 2024.

LG Chem’s announcement came amid mounting complaints from retail investors for the company’s decision to split off its battery business as a wholly-owned subsidiary named LG Energy Solution, which will be established on Dec. 1.

“It seems LG Chem is emphasizing that the split-off won’t affect the company’s overall revenue structure,” another industry source said.

To ease jitters from investors, LG Chem said last month it would maintain a dominant share of 70-80 percent in LG Energy Solution even after taking the subsidiary public.

LG Chem will disclose net profit and breakdown of the revenue and operating profit figures at a conference call set for Oct. 21.

By Kim Byung-wook (kbw@heraldcorp.com)