LG Sees Dividend Income Rise Despite Subsidiary Reduction Following Corporate Split

[Asia Economy Reporter Park Sun-mi] Despite a decrease in the number of subsidiaries due to LG's corporate separation, dividend income slightly increased in the first quarter of this year, and trademark revenue also saw growth.

On the 14th, securities firms commented on LG's first-quarter earnings announcement, noting that despite the reduction in the number of subsidiaries due to corporate separation, dividend income slightly increased this year following the upward revision of dividend payments by LG Chem and LG Uplus at the end of 2021. They also expect dividend income to remain strong in 2023.

LG reported consolidated operating profit for the first quarter at 828.279 billion KRW, down 14% year-on-year. The Ukraine crisis led to increased costs for crude oil and other raw materials as well as logistics expenses, and the lockdowns in Chinese cities negatively impacted equity-method earnings from chemical affiliates.

However, LG's standalone operating revenue (sales) recorded 644.2 billion KRW, an 8% increase compared to the same period last year. Dividend income rose 8% year-on-year to 525.6 billion KRW, trademark usage income increased 7% to 85 billion KRW, and rental income grew 5% to 33.7 billion KRW. LG operates as a pure holding company without direct business operations, generating income through dividends, trademark usage, and rentals.

Dongyang Kim, an analyst at NH Investment & Securities, explained, "Despite the decrease in the number of subsidiaries due to corporate separation, dividend income in 2022 slightly increased due to the upward revision of dividend payments by LG Chem and LG Uplus at the end of 2021. Additionally, the disposal of controlling stakes in D&O (formerly S&I Corporation) operating companies (60% of S&I Expert for 364.3 billion KRW, 60% of S&I Construction for 290 billion KRW) suggests strong dividend income is expected in 2023."

Attention is also increasing on the cash value of LG's unlisted affiliates. Ilwoo Yang, an analyst at Samsung Securities, noted regarding LG CNS's issuance of a request for proposal for selecting an IPO underwriter, "As of 2021, LG CNS's sales and net profit were 4.1 trillion KRW and 234.9 billion KRW respectively, and if there is some sale of existing shares, significant cash inflow to the holding company is expected." Namgon Choi, an analyst at Yuanta Securities, also assessed that "the value of LG's stake in LG CNS exceeds 1.5 trillion KRW."