LG Chem reports consensus-beating net profit in third quarter

LG Chem reported a consensus-beating net profit in the third quarter, helped by strong sales of batteries and battery materials with the growing demand for electric vehicles (EVs).

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 reported a consensus-beating net profit in the third quarter, helped by strong sales of batteries and battery materials with the growing demand for electric vehicles (EVs).

Net profit rose 5 percent to 713.9 billion won ($500 million) in the third quarter, beating the market consensus of 615.6 billion won compiled by FnGuide.

Quarterly revenues came in at a record high of 14.2 trillion won, up 33.8 percent on year, slightly short of the market expectation of 14.4 trillion won.

Operating profit rose 23.9 percent to 901.2 billion won during the July-to-September period, beating the market consensus of 851.5 billion won.

“Demand for petrochemicals dropped overall,” Cha Dong-seok, LG Chem’s chief financial officer, said during a conference call Monday afternoon.

“But we were able to report solid earnings as sales grew in the battery and new material businesses.”

In the petrochemicals business, the company’s traditional cash cow, operating profit plunged 91 percent to 92.6 billion won. Sales were down 2.4 percent to 5.5 trillion won.

Cha predicts that the business will likely start recovering in the first quarter of next year.

But the batteries and battery material businesses stayed strong.

LG Energy Solution, an EV battery maker 81.8 percent owned by LG Chem, logged a net profit of 187.7 billion won for the July-to-September period, compared to a net loss of 205.8 billion won in the third quarter last year.

Sales jumped 89.9 percent on year to a record 7.65 trillion won. Operating profit was 521.9 billion won, marking a turnaround from the 372.8-billion-won loss a year earlier. Both figures beat market expectations.

The advanced material business reported 415.8 billion won in operating profit, up 749 percent on year. Revenue surged 123 percent to 2.6 trillion won, in part thanks to robust sales of EV battery materials including cathodes.

Cha said LG Chem is currently considering more investment in the North American region to expand its cathode production.

“If so, we will be able to meet the IRA requirements without difficulties,” said Cha.

Under the terms of the Inflation Reduction Act (IRA), buyers of EVs assembled in the United States are eligible for a $7,500 tax credit for vehicles purchased after Aug. 16, 2021.

After Jan. 1, 2023, content requirements for batteries begin to phase in over a number of years. In 2023, 40 percent of critical-mineral value will have to come from the United States or countries that the United States has signed free trade agreements with to qualify for $3,750 of the credit. That number increases 10 percentage points a year to 80 percent in 2027.

Fifty percent of battery-component value will have to come from the United States to qualify for another $3,750 of the tax credit. That number will increase 10 percentage points a year to 100 percent by 2029.

To qualify for the subsidy, a vehicle must be completely free of Chinese-made components from 2024 and free of Chinese critical minerals from 2025.

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