LG Chem’s Q3 profit soars, battery earnings at record high

South Korea’s LG Chem Ltd. reported on Oct. 21 that its quarterly revenue and operating profit rose to all-time highs in the July-September period thanks to robust sales in petrochemical products and batteries.

The company said in a regulatory filing that its third-quarter net profit more than quadrupled to 570.4 billion won ($530 million) on a consolidated basis from 137.2 billion won in the year-earlier period.

LG Chem, the country’s largest chemical and electric vehicle battery maker, said revenue rose 8.8% on year to a record 7.51 trillion won.

Operating profit more than doubled to a quarterly record of 902.1 billion won, in line with its earlier earnings estimates.

Last week, the company flagged that its third-quarter revenue and operating profit would rise to all-time quarterly highs, boosted by its cash-cow petrochemical business. 

Operating profit at LG Chem’s mainstay petrochemical business more than doubled to 721.6 billion won in the third quarter, 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’s operating profit margin rose to its highest quarterly level of 20.1%, compared to the second quarter’s 13.1% and 8.1% in the third quarter of 2019.

BATTERY BUSINESS DELIVERS SURPRISE

The company’s earnings surprise came from its battery business, which more than doubled to 168.8 billion won from a year earlier, thanks to rising cylindrical battery sales. New EV launches by European automakers and rising sales of new mobile devices also lifted its battery earnings.

Analysts earlier expected LG Chem’s battery operating profit to come in at the 100 billion won range.

LG Chem, the world’s largest EV battery manufacturer, supplies batteries to major global electric car makers, including Tesla Inc., as well as local automakers Hyundai Motor Co. and Kia Motors Corp.

BRIGHT Q4 OUTLOOK

Looking ahead, LG Chem’s Chief Financial Officer Cha Dong-seok said the company’s sales and profitability in its petrochemical and battery divisions would further improve in the fourth quarter.

The company last week released its first-ever quarterly earnings guidance before the mandatory final report, in a move to alleviate market concerns over the planned battery business spin-off, by providing shareholders and investors with clearer earnings projections.

Shares of LG Chem have sharply fallen since its announcement in mid-September that it would spin off its lucrative battery business as a subsidiary, as investors betting on the growth of electric cars and batteries dumped the chemical maker’s stock.

Write to Jae-Kwang Ahn at ahnjk@hankyung.com
In-Soo Nam edited this article.