LG Chem Q3 Operating Profit 726.6 Billion KRW... 20% YoY Decrease Due to Recall Provisions (Update)

Q3 Business Performance Announcement

LG Chem Daesan Plant NCC

[Asia Economy Reporter Choi Dae-yeol] LG Chem announced on the 25th that its operating profit for the third quarter of this year was 726.6 billion KRW, a decrease of 19.6% compared to the same period last year.

Sales increased by 41.4% to 10.6102 trillion KRW during the same period. The decline in profit was due to the provision for recalls by General Motors (GM), with whom LG Chem has a joint venture.

Cha Dong-seok, LG Chem’s Chief Financial Officer (CFO), stated, "Despite domestic and international uncertainties, excluding one-time factors, the trend of continuous sales growth and solid profit generation capability remains unchanged. We will focus on nurturing eco-friendly sustainable businesses, expand battery materials business, and strengthen clinical investments for new drug development to become a continuously growing company."

By business division, the petrochemical division recorded sales of 5.6301 trillion KRW and operating profit of 1.0869 trillion KRW. Although profits slightly decreased, product demand still exceeds supply, resulting in the highest quarterly sales on record. Although regular maintenance is scheduled for the fourth quarter at Daesan NCC and others, the company expects solid performance to continue due to supply-demand impacts such as China’s power restrictions and rising coal prices.

The advanced materials division posted sales of 1.1582 trillion KRW and operating profit of 49.1 billion KRW, both down from the previous quarter. The volume decreased due to unresolved supply-demand issues in front-end industries such as automotive semiconductors. The life sciences division recorded sales of 177.4 billion KRW and operating profit of 9.2 billion KRW, both lower than the previous quarter.

Subsidiary LG Energy Solution posted sales of 4.0274 trillion KRW and an operating loss of 372.8 billion KRW. Although steady demand for cylindrical batteries for electric vehicles and IT applications generated profits, the company recorded a loss due to the recall provision. Without reflecting the recall loss, operating profit would have been 25.1 billion KRW, with an operating margin of about 6.2%. Farm Hannong recorded sales of 122.5 billion KRW and an operating loss of 9.7 billion KRW.

The company estimated that if the recall provision had not been reflected, the total operating profit across all business divisions would have been around 1.35 trillion KRW. Although this is somewhat lower compared to the record-high results in the second and first quarters of this year, it is more than ten times higher than the same period last year. Vice President Cha Dong-seok said, "We will take the recall as an opportunity to prioritize quality as the highest value and improve safety through strong quality enhancement measures."