South Korea’s LG Chem Ltd. said on Wednesday that its quarterly revenue and operating profit rose to all-time highs in the January-March period thanks to robust sales of petrochemical products and batteries.
Operating profit on a consolidated basis jumped to 1.4 trillion won ($1.2 billion) in the first quarter, up 584% from the year-earlier period, while sales rose 43.4% to 9.6 trillion won, the company said in a regulatory filing.
Both its revenue and operating profit beat market expectations and mark the company’s best-ever quarterly results.
LG Chem, the country’s largest chemical and electric vehicle battery maker, said its spectacular results largely stem from its cash-cow petrochemical business.
LG Chem’s mainstay petrochemical division posted an operating profit of 983.8 billion won, accounting for 70% of the company’s total operating profit, as raw material costs fell and the stay-at-home trend lifted demand for home appliances, a key application of the petrochemical product business.
The petrochemical division’s revenue stood at 4.44 trillion won, yielding an operating profit margin of 22.1%.
The cold wave in the US state of Texas in the first quarter, which suspended petrochemical plants in the region, also contributed to LG Chem’s strong showing.
"Despite the uncertain business environment, our company reorganized the business structure and kept investing in new growth drivers to create sustainable income sources," Chief Financial Officer Cha Dong-seok said during a conference call with analysts.
BATTERY BUSINESS IN GOOD SHAPE
The company’s earnings surprise is also owing to its battery business, which booked 4.25 trillion won in sales and 341.2 billion won in operating profit in the first three months of the year – both its record quarterly results.
LG Energy Solution's cylindrical-type battery The profit margin of its battery business, spun off as LG Energy Solution Ltd. in December 2020, came in at 8% in the first quarter. The company said it aims to raise the margin to more than 10% in coming quarters with increased sales of cylindrical batteries, which are in growing demand from US automakers.
LG Energy Solution supplies batteries to major global electric car makers, including Tesla Inc. and General Motors Co., as well as to local automakers Hyundai Motor Co. and Kia Corp.
Looking ahead, LG Chem executives said the company’s sales and profitability in its petrochemical division would improve further.
From the second quarter, the company plans to put into operation its second naphtha cracking plant in Yeosu, which has facilities for high-end petrochemical products such as nitrile butadiene latex (NBL), a raw material for latex gloves, as well as expanding production at its plants that manufacture carbon nanotubes (CNTs), an anode conductive agent material used in batteries.
“Once these plants are in full operation, we expect to see more sales and improved profitability from the petrochemical business,” said a company official.
LG Energy Solution and its partner GM are building their second Ultium Cells plant in the US. Analysts said the global petrochemical industry may enter a boom period amid the prolonged pandemic, driving up demand for home appliances that rely heavily on plastics and other petrochemical products.
LG Chem’s other business divisions also posted decent earnings in the first quarter.
The advanced materials division logged an operating profit of 88.3 billion won on revenue of 1.17 trillion won, while its life science division posted 22.5 billion won in operating profit with sales of 161.9 billion won.
Write to Jae-Kwang Ahn at ahnjk@hankyung.com In-Soo Nam edited this article.
