LG Chem misses as chemical slump overwhelms booming batteries

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LG Chem misses as chemical slump overwhelms booming batteries

LG Chem CEO Shin Hak-cheol speaks during his meeting with U.S. Treasury Secretary Janet Yellen who visited LG Sciencepark in Gangseo District, western Seoul, on July 19. [LG CHEM]

LG Chem CEO Shin Hak-cheol speaks during his meeting with U.S. Treasury Secretary Janet Yellen who visited LG Sciencepark in Gangseo District, western Seoul, on July 19. [LG CHEM]

 
LG Chem's net profit fell 13 percent in the first quarter on the sluggish demand for petrochemicals.
 
The Korean company reported 669.1 billion won ($500 million) in net profit in the first quarter, down 13 percent on year. 
 
It still beat the market consensus of 428.2 billion won compiled by FnGuide.  
 
Operating profit declined 22.8 percent to 791 billion won, beating the market expectation of 648.1 billion won.
 
Quarterly revenues came in at 14.5 trillion won during the January-to-March period, up 24.9 percent on year. It slightly missed the market expectation of 15 trillion won.
 
The petrochemical business generated a 50.8 billion won operating loss, with revenues falling 23 percent to 4.6 trillion.  
 
Cha Dong-seok, LG Chem’s chief financial officer, blamed the "lingering slowdown of home appliances and the construction industry amid the global economic downturn" for the weak performances. 
 
"We expect the petrochemical business will turn to profit again in the second quarter as the demand will likely return,"  Cha said during a conference call Thursday afternoon.   
 
The battery and battery materials businesses performed well.  
 
LG Energy Solution, an electric vehicle battery maker 81.8 percent owned by LG Chem, generated a 148 percent jump in profit to 562 billion won in the first quarter. Quarterly revenues came in at an all-time quarterly high of 8.7 trillion won, a 101.4 percent year-on-year increase. 
 
The advanced material business reported 203 billion won in operating profit, up 32 percent on year. Revenues jumped 67 percent to 2.6 trillion won, in part thanks to robust sales of electric vehicle battery materials including cathodes.
 
"We are reviewing a plan to enter the cathode business for LFP [lithium iron phosphate] batteries upon constant requests from our clients," Lee Young-seok, head of the advanced materials department, said at the conference call. 
 
Global automakers like Tesla and Ford are increasing the use of LFP batteries as they cost around 30 percent less than today's high-nickel batteries and have lower fire risks. 
 
Around 95 percent of the LFP battery market is controlled by Chinese manufacturers including CATL.
 
LG Chem shares rose 1.93 percent to 741,000 won Thursday.  
 

BY SARAH CHEA [chea.sarah@joongang.co.kr]
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