LG Chem Continues Petrochemical Operating Losses... "Q2 Improvement Expected" (Update)

LG Chem announced on the 30th that its consolidated operating profit for the first quarter fell 67.1% year-on-year to 264.6 billion KRW due to sluggish performance in the petrochemical sector. Sales amounted to 11.6094 trillion KRW, down 18.7% compared to the same period last year.

Compared to the previous quarter, sales decreased by 11.6%, but operating profit increased by 7.0%. Dongseok Cha, LG Chem's Chief Financial Officer (CFO), stated, "Despite the challenging business environment, we achieved improved profitability compared to the previous quarter based on our crisis management capabilities," adding, "We will continue gradual performance improvements through fundamental business competitiveness enhancement centered on the three new growth engines and operational optimization activities."

The petrochemical division recorded sales of 4.4552 trillion KRW and an operating loss of 31.2 billion KRW. Although raw material prices rose due to geopolitical risks, the company reduced the deficit compared to the previous quarter through the naphtha lagging effect (time lag in raw material input) and cost-cutting activities. The company expects profitability to improve in the second quarter despite prolonged high oil prices and high interest rates, driven by the peak season for home appliances and key products, as well as the operation of new high-value-added product lines.

The advanced materials division achieved sales of 1.5834 trillion KRW and operating profit of 142.1 billion KRW. Battery materials shipments increased significantly due to the base effect from the previous quarter, and electronic materials saw improvements in sales and profitability due to an increased proportion of high-value-added products. From the second quarter, profitability is expected to improve as the impact of reverse lagging (profit reduction due to time lag in raw material input) decreases with increased cathode material shipments and stabilization of metal prices.

The life sciences division recorded sales of 284.9 billion KRW and operating profit of 3.3 billion KRW. Sales rose slightly year-on-year due to stable sales of key products such as diabetes and growth hormones, but research and development (R&D) costs increased due to the execution of global clinical projects.

LG Energy Solution posted sales of 6.1287 trillion KRW and operating profit of 157.3 billion KRW. While cylindrical battery sales increased by actively responding to demand from strategic customers, sales and profits declined compared to the previous quarter due to weakening demand in the downstream market and falling metal prices.

Farm Hannong recorded sales of 245.7 billion KRW and operating profit of 34.9 billion KRW. Although sales decreased year-on-year due to falling fertilizer prices, profitability improved thanks to expanded overseas sales of crop protection products and price increases.