LG

■ Q2 Business Performance
 □ Sales: KRW 12.2399 trillion (7.0% increase YoY/5.6% increase QoQ)
 □ Operating profit: KRW 878.5 billion KRW (59.0% decrease YoY/14.3% decrease QoQ)
 
■ Highest quarterly sales and solid profitability despite difficult business environment uncertain market conditions
 □ Contributing factors: competitive product portfolio in the petrochemical business and significant sales growth and profitability in the advanced materials business
 
■ CFO Dong Seok Cha:
“At a time of great external uncertainty, we will enhance customer-oriented commercial excellence and internal efforts to improve profitability, and continue to prepare for future growth through investments focused on three new growth engines, including the rapidly growing battery material business.”
 
 
LG Chem announced on July 27th a business performance of KRW 12.2399 trillion in sales and KRW 878.5 billion in operating profit in the second quarter of this year.
 
Sales increased 5.6% quarter-over-quarter, but operating profit fell 14.3%. Compared to the same period last year, sales rose 7.0% and operating profit dropped 59.0%.
 
Regarding the second quarter performance, LG Chem’s Executive Vice President and CFO Dong Seok Cha explained, “Despite the difficult business environment such as high oil prices, global inflation, and China’s COVID lockdown, we were able to achieve the highest quarterly sales and solid profitability amid uncertain market conditions due to competitive product portfolio in the petrochemical business and significant sales growth and profitability in the advanced materials business.”
 
He added, “At a time of great external uncertainty, LG Chem will enhance customer-oriented commercial excellence and internal efforts to improve profitability and continue to prepare for future growth through investments focused on three new growth engines, including the rapidly growing battery material business.”
 
Looking at the detailed Q2 earnings and Q3 outlook by business division,
 
The Petrochemicals Company recorded sales of KRW 5.9876 trillion and an operating profit of KRW 513.2 billion. Although product spreads worsened due to rising raw material prices and the global economic slowdown, the company recorded solid profitability (8.6%) compared to market conditions based on an exceptional product portfolio, including POE (polyolefin elastomer) used in solar films and SAP (super absorbent polymer) for diapers.
 
While tough market conditions are expected in Q3, such as the continued fall in global demand and increased supply in the region following high oil prices and inflation, as well as the beginning of the off-season, the company will continue to maintain profitability by focusing on high value-added products.
 
The Advanced Materials Company recorded sales of KRW 2.0184 trillion and an operating profit of KRW 335.4 billion. The highest quarterly sales were achieved thanks to the continued increase in selling price with the expansion of battery material shipments and rising raw material prices. Profitability also improved due to favorable exchange rates and increased shipments of highly lucrative products such as high-nickel cathode materials and semiconductor materials.
 
Although profitability will be inevitably affected in Q3 following the fall in metal prices, growth is expected to continue in the battery materials business with a significant boost in the shipment of cathode materials.
 
The Life Sciences Company posted sales of KRW 221.7 billion and an operating profit of KRW 24.2 billion. Sales of major products such as diabetes medication and growth hormones continued to increase, generating solid sales and profitability.
 
In Q3, R&D expenses are expected to rise due to global clinical trials of new drugs, while solid sales growth is expected from continued growth in the market share of major products such as diabetes medication and vaccines, in addition to the recovery of the aesthetics business.
 
Meanwhile, LG Energy Solution recorded KRW 5.0706 trillion in sales and KRW 195.6 billion in operating profit. Sales increased QoQ due to increased sales of cylindrical batteries for electric vehicles and expanding index-linked contracts for metals in response to rising raw material prices. However, profitability fell in the aftermath of lockdowns in China and the global logistics disruption caused by the spread of COVID.
 
In Q3, a massive sales growth is expected from the key clients’ launch of new cars, as well as the initial batch of supplies to strategic buyers as the joint venture with GM begins full operations this quarter.
 
Farm Hannong posted sales of KRW 240.5 billion and an operating profit of KRW 17.1 billion. The increase in domestic and international sales of crop protection agents, including the export boost of Terrad’or, contributed to the YoY sales growth.
 
In the third quarter, it is expected to improve annual sales and profitability following higher sales of crop protection agents abroad and the sales growth of special fertilizers.
 
 
References
 
■ LG Chem’s Q2 Business Performance (consolidated)    (Unit: KRW 1 billion)

 
■ LG Chem’s Q2 Business Performance (excluding Energy Solution)    (Unit: KRW 1 billion)