Petrochemical Sector Turns Profitable but Growth Limited
Anode Material Production Targets Also Revised Downward
2026 Output Reduced from 280,000t to 200,000t
LG Chem has broadly lowered its targets for this year, considering the industrial market conditions and macroeconomic uncertainties. The scale of capital expenditure (CAPEX), initially aimed at 4 trillion won this year, has been reduced to the mid-3 trillion won range, similar to last year. The company plans to adopt a conservative strategy by flexibly adjusting the pace of investment according to customer circumstances, aiming to overcome the challenging business environment.
LG Chem announced on the 25th that it recorded consolidated sales of 12.2997 trillion won and operating profit of 405.9 billion won in the second quarter of this year. Compared to the same period last year, sales decreased by 14.2% and operating profit by 34.3%. Compared to the previous quarter, sales increased by 5.9% and operating profit by 53.4%.
Cha Dong-seok, LG Chem’s Chief Financial Officer (CFO) and President, said during the Q2 earnings conference call, "We achieved improved results compared to the previous quarter due to the petrochemical segment turning profitable, increased shipments of battery materials, and licensing out of a rare obesity treatment drug," but added, "We expect the difficult environment, including continued global economic downturn due to weak demand in China, slower-than-expected growth in electric vehicles, and rising maritime freight costs, to persist for the time being."
Limited Improvement in Petrochemical Profitability... Business Expansion into North America
The petrochemical division recorded sales of 4.9658 trillion won and operating profit of 32.3 billion won in Q2. Despite strong raw material prices, the segment turned profitable due to increased sales of key products driven by the seasonal peak in end markets such as home appliances. The company expects the demand-supply balance to gradually recover in Q3, but profitability improvement will be limited due to delayed global demand recovery and rising freight costs.
In particular, LG Chem viewed the effect of China’s consumption stimulus policy, "Yi Gu Huan Xin," as insignificant. The company stated, "Although the impact varies by product, we do not expect a significant effect beyond restoring supply-demand balance." It added, "Slight demand recovery and supply easing are expected in the automotive and home appliance sectors, but demand weakness and oversupply in real estate and construction-related products will likely continue, so recovery is not expected in the near term."
Regarding cash flow improvement measures, CFO Cha drew a line, saying, "There are no confirmed plans yet for partial sales of the NCC or establishing joint ventures (JVs)." He continued, "We are restructuring our business by divesting small-scale non-core businesses," and added, "In the mid-to-long term, we are enhancing competitiveness by expanding the proportion of high value-added products and sustainability businesses, and diversifying sales regions toward North America."
The expansion of business into the Americas is progressing smoothly. CFO Cha said, "Sales of products such as polyolefins, ABS for home appliances, and PBAT, mainly sold in North America, increased by about 5-15% compared to Q1," and added, "Especially, ABS is expanding its customer base as the compound plant in the Americas started operations in the first half."
Production Targets for Cathode Materials Lowered One After Another... Continued Pace Adjustment
The energy solutions segment also struggled due to the slowdown in electric vehicle market demand. It recorded sales of 6.1619 trillion won and operating profit of 195.3 billion won in Q2, down 29.8% and 57.6% respectively from the same period last year. Due to the slowdown in electric vehicle growth and continued weakness in metal prices, sales are expected to fall short of market forecasts in Q3 as well. The advanced materials division recorded sales of 1.7281 trillion won and operating profit of 169.9 billion won.
As the slowdown in the electric vehicle market is expected to last longer than anticipated, LG Chem plans to focus on improving operational efficiency. With major automakers adjusting their production plans, the company lowered its cathode material production target for this year from a 40% increase to a 20% increase compared to last year. The 2026 production target for cathode materials was also reduced from 280,000 tons to 200,000 tons.
LG Chem stated, "We intend to make conservative investment decisions in line with industrial market conditions and macroeconomic uncertainties," and added, "We will also flexibly adjust the pace of cathode material production capacity (CAPA) according to customer portfolios and market demand."
Investment plans have also been postponed. LG Chem said, "Following the adjustment of investment plans, the schedule for the LFP cathode material capacity under construction in Morocco, targeted for mass production in 2026, will be deferred." It added, "Ramp-up of the domestic Gumi plant, which began construction at the end of last year, and the U.S. plant under construction with initial mass production targeted for June 2026 will proceed as planned, but subsequent capacity plans will be deferred according to customer plans."
The separator business investment is also being reconsidered. LG Chem said, "We are conducting a comprehensive review of capacity expansion plans for the separator business, considering the growth in battery material demand and competitiveness of Chinese separator companies," and added, "We are also reviewing existing agreements in light of strategic changes by our partner, Japan’s Toray."
CFO Cha emphasized, "While there may be short-term demand volatility in the electric vehicle market, it will grow in the mid-to-long term," and said, "In difficult times, we will focus on fundamentals and enhance our core competitiveness to turn the current crisis into an opportunity and become a stronger LG Chem."
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