Outlook Revised to Negative,
But Credit Rating Remains at AA+
Korea Investors Service announced on June 20 that it has revised the outlook on LG Chem’s unsecured bond credit rating from “stable” to “negative.” However, the credit rating itself remains at “AA+.”
Korea Investors Service cited several reasons for the change in outlook: a decline in operating performance due to unfavorable market conditions; an increase in borrowings resulting from large-scale facility investments; and expectations that weak performance and heavy debt burdens will continue in the medium to short term.
In its report released the same day, Korea Investors Service pointed out, “Operating losses in the petrochemical segment are continuing, as recovery in downstream demand is being delayed due to the slow economic recovery in China and heightened global uncertainty caused by US tariffs.”
The agency also noted, “Since 2022, capital expenditures (CAPEX) have expanded due to investments in new and expanded energy solution plants in regions such as the United States, Canada, and Indonesia, as well as expansion in advanced materials and routine investments in petrochemicals. While annual CAPEX used to remain within 6 trillion won, it surged to 14.8 trillion won last year, resulting in persistently excessive investment spending compared to operating cash generation and leading to a cumulative deficit in free cash flow (FCF).”
Additionally, Korea Investors Service forecast, “Delayed ethylene capacity expansion in China is expected to accelerate again after 2025, and supply pressures will intensify as global refiners enter the chemical industry. As a result, weak performance in the petrochemical segment is likely to persist in the medium to short term.”
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