"Careful Investment Amid Global Uncertainty"
Facility Investment Scale Reduced from 4 Trillion to 2 Trillion Won This Year
As the global petrochemical industry downturn prolongs, LG Chem posted weaker results in the third quarter compared to last year.
On the 28th, LG Chem announced that its consolidated sales for the third quarter of this year reached KRW 12.6704 trillion, with an operating profit of KRW 498.4 billion. Compared to the same period last year, sales decreased by 6.1% and operating profit fell by 42.1%. Compared to the previous quarter, sales increased by 3% and operating profit rose by 22.8%.
Chief Financial Officer (CFO) Cha Dong-seok said, "Despite the challenging business environment, we are continuously strengthening our cost competitiveness based on our excellent process technology to create differentiated results."
He added, "Geopolitical risks, a slowdown in global economic recovery, the electric vehicle chasm (temporary demand slowdown), and falling metal prices have increased external and internal uncertainties more than ever," emphasizing, "In such circumstances, it is important for companies to solidify their fundamentals and build core competitiveness to achieve high growth in the mid to long term."
As part of this, LG Chem plans to reduce its originally planned capital expenditure (CAPEX) of KRW 4 trillion this year to the mid-KRW 2 trillion range. Previously, during the second quarter earnings announcement, the company had stated it would cut CAPEX to the KRW 3 trillion range, and now it intends to reduce it further. CFO Cha said, "Considering industry conditions, market volatility, and macroeconomic uncertainties, we are making investment decisions more conservatively and cautiously."
The petrochemical division recorded sales of KRW 4.8132 trillion and an operating loss of KRW 38.2 billion. A slight loss was recorded due to temporary increases in raw material prices, freight costs, and the impact of exchange rate declines. In the fourth quarter, profitability is expected to improve due to cost improvements from falling raw material prices and increased operating rates of newly established plants.
The advanced materials division posted sales of KRW 1.7124 trillion and operating profit of KRW 150.2 billion. There were slight declines in shipment volume and selling prices of battery materials, along with exchange rate fluctuations. For the fourth quarter, sales and profitability expansion are expected to be limited due to year-end inventory adjustments by customers and the seasonal off-season for electronic materials.
During the conference call, LG Chem explained, "Due to declines in lithium and nickel prices, fourth-quarter profitability is expected to decrease by about 10%. Although cathode material shipments are expected to increase by 25% in 2025 compared to this year, driven by growth in North American volumes, metal prices are forecasted to drop sharply, resulting in a 40% decline in cathode material prices."
Subsidiary Energy Solution recorded sales of KRW 6.8778 trillion and operating profit of KRW 448.3 billion. Sales increased due to demand recovery from European customers and increased production in North America, while profitability improved thanks to higher operating rates from volume expansion and stabilization of metal prices. Despite customer inventory adjustments and metal price declines in the fourth quarter, volume growth is expected due to expanded battery supply for electric vehicles and energy storage systems (ESS).
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