LG Chem Ltd. to decide on petrochemical restructuring by year-end; cathode material shipments to at least double next year [Comprehensive]

[Financial News] LG Chem Ltd. plans to decide on the direction of its petrochemical business restructuring this year and increase cathode material shipments next year to at least double this year's level. It will use KRW 400 billion of the funds raised by monetizing its stake in LG Energy Solution for shareholder returns. With its petrochemical business having swung to a loss in the third quarter, the company plans to pursue restructuring and expand sales of advanced materials.
According to LG Chem Ltd.'s third-quarter earnings conference call on the 5th, the company will finalize its decision on the direction of its petrochemical business restructuring and submit a restructuring plan by year-end. It is currently discussing the details with its partners.
LG Chem Ltd. expects the petrochemical supply glut to continue next year. It forecast that around 8 million metric tons of capacity will be shut down in Northeast Asia by 2031, while capacity additions will total around 29 million metric tons.
LG Chem Ltd. posted consolidated third-quarter revenue of KRW 15.496 trillion and operating profit of KRW 561.2 billion. Revenue rose 34.0% from a year earlier, while operating profit fell 17.4%. Its petrochemicals division swung to an operating loss of KRW 175.6 billion due to narrower spreads resulting from reverse lagging in raw material prices, higher transportation costs and a decline in exchange rates.
The company also expects to face headwinds in the fourth quarter of this year from high oil prices and scheduled maintenance at Yeosu No. 1 naphtha cracking center (NCC). LG Chem Ltd. restarted Yeosu No. 2 NCC early last month after suspending operations in March, and plans to adjust operations depending on market conditions.
The advanced materials division posted third-quarter revenue of KRW 1.0726 trillion and operating profit of KRW 39.7 billion. LG Chem Ltd. expects supplies of cathode materials to new customers and LG Energy Solution to increase in the second half of this year, with annual shipments next year projected to at least double from this year's level. It noted, however, that if metal prices remain weak, revenue growth could be limited compared with the increase in shipments.
The cathode material plant in Tennessee, U.S., is currently in trial production and is scheduled to begin mass production in the first quarter of next year, taking customer Ultium Cells LLC's production plans into account. LG Chem Ltd. is working to finalize a supply contract for around 40,000 metric tons of high-density lithium iron phosphate (LFP) cathode materials in line with expected demand growth in 2028–2029.
The life sciences division posted revenue of KRW 337.3 billion and operating profit of KRW 23.2 billion. The value of the technology licensing agreement for a rare obesity treatment with U.S.-based Rhythm Pharmaceuticals increased from around KRW 400 billion to KRW 1.15 trillion.
LG Energy Solution posted third-quarter revenue of KRW 9.6434 trillion and operating profit of KRW 756 billion. Operating profit included KRW 416.9 billion in North American production subsidies under the U.S. Advanced Manufacturing Production Credit (45X); excluding these, it was KRW 339.1 billion.
On the 28th of last month, LG Chem Ltd. announced plans to monetize around KRW 2.5 trillion worth of its stake in LG Energy Solution and use about 20% of the after-tax proceeds, or KRW 400 billion, for shareholder returns. Of this amount, KRW 300 billion is slated for the purchase and cancellation of treasury shares, while the remaining roughly KRW 100 billion will be used for a year-end dividend.
LG Chem Ltd. Chief Financial Officer (CFO) and President Cha Dong-seok said, "Despite uncertainties in the market environment, including rising oil prices due to geopolitical risks in the Middle East and increased volatility in raw material prices, companywide performance remained stable, supported by improved profitability in advanced materials and energy solutions."

[email protected] Kim Mi-hee Reporter