LS Group Offsets COVID Impact Through Business Diversification and Overseas Orders

LS Cable & System is installing submarine cables at the first offshore wind farm in the United States.

[Asia Economy Reporter Ki-min Lee] LS Group affiliates are expected to offset the impact of the novel coronavirus (COVID-19) by continuing their renewable energy-related businesses and overseas orders.

According to industry sources on the 2nd, LS is forecasting steady performance growth by diversifying its business and securing large overseas orders one after another. According to a recent LS report by Samsung Securities, sales, which were 10.176 trillion KRW last year, are expected to increase to 10.338 trillion KRW this year and 11.604 trillion KRW in 2022.

First, a major factor in LS's performance increase is the submarine cable orders of LS Cable & System, an unlisted affiliate of LS Group. Samsung Securities forecasted that subsidiaries of LS Cable & System, such as LS Cable Asia, will also see favorable profit growth due to the continuous increase in cable demand in Southeast Asia, including Vietnam, and improvements in the domestic business environment. LS Cable & System plans to accelerate the development of new markets in the U.S., Europe, and Africa.

The global trend toward nuclear phase-out and eco-friendly power generation policies is also a positive factor for LS Cable & System. Last year, LS Cable & System secured all the ultra-high voltage submarine cable supply rights for the first phase of an offshore wind farm project ordered in Taiwan and began shipments in June. Since the project is progressing in three phases, there is potential for additional orders in the future.

LS Electric (formerly LS Industrial Systems), a listed affiliate of LS Group, is aiming for global business expansion based on convergence businesses such as smart grids, solar power, energy storage systems (ESS), and railway signaling. After establishing a global business division last year, LS Electric changed its company name from Industrial Systems to Electric in March this year to imprint its brand image on foreign customers. LS Electric entered the Chinese ESS market in June and recently succeeded in securing additional orders in the Thai railway signaling market. Recently, it has been collaborating with other companies such as Doosan and Hanwha to develop a model that generates electricity using waste pressure generated during the city gas pressure reduction process.

Meritz Securities forecasted in a report that LS Electric will record good performance in 2021 based on its existing and convergence businesses. According to the Meritz Securities report, LS Electric's sales forecast for this year is about 2.3962 trillion KRW, slightly exceeding last year's sales of 2.3468 trillion KRW. Operating profit is expected to decrease by about 10 billion KRW to 158 billion KRW compared to last year, but in 2021, with increased order opportunities, sales and operating profit are expected to grow to around 2.6 trillion KRW and 200 billion KRW, respectively.

There is also a forecast that the increase in cable demand due to the expansion of renewable energy businesses could be a positive factor for LS Nikko Copper. As cable demand increases, the prices of copper for cables and wiring (electrical copper) rise, leading to increased sales. Industry insiders expect that despite the resurgence of COVID-19, LS Group will not suffer significant damage. An industry official said, "The main businesses of LS Group, such as cables and energy-related fields, are mostly government-led projects rather than private orders, so the impact is relatively small," adding, "LS Group has been diversifying its business sectors even before COVID-19, and overseas sales are also increasing, so it is more of an opportunity than a crisis."