S&P upgrades LG Electronics' long-term credit rating for first time in 12 years

S&P Global Ratings raised LG Electronics' long-term credit rating one notch to BBB+ from BBB on Tuesday, with a stable outlook, the company said Wednesday. It is the first time the agency has upgraded the rating in about 12 years.

LG Electronics' logo is seen during the World IT Show in Seoul on April 22. [AP/YONHAP]

S&P Global Ratings raised LG Electronics' long-term credit rating one notch to BBB+ from BBB on Tuesday, with a stable outlook, the company said Wednesday. It is the first time the agency has upgraded the rating in about 12 years.

S&P tied the upgrade to the strength of LG's core businesses and a turnaround at affiliate LG Display. The stable outlook reflects the agency's expectation that LG's "core business competitiveness will support credit strength, generate strong free cash flow, and reduce debt," it said.

LG's core businesses, including LG Display, should deliver solid operating performance over the next two years,

"Driving this will be strong offerings among premium products in LG Electronics' home appliance solution division, diversified services within its subscription business and increasing penetration in its higher-margin business-to-business segment," S&P said.

"LG Electronics has recently strengthened its market positioning in premium home appliances, and the segment's inelasticity compared to others will likely support stable profitability."

The media entertainment solutions business will "grow and produce modest profits over the next one to two years" after last year's losses, S&P said.

"We believe a shift to premium product offerings such as large OLED TVs should support growth," S&P said. "The company's high-margin, high-growth WebOS software business will likely expand further, using the company's existing installed base as a market leader in the TV segment."

LG Electronics displays its latest laundry innovations at KBIS 2026 on Feb. 17 in Orlando, Florida. [LG ELECTRONICS]

The agency said major sporting events this year, including the World Cup and the Winter Olympics, should also lift results, along with savings from a restructuring LG carried out in the second half of last year.

S&P expects the vehicle solutions business to keep growing and improve profitability. The agency called LG a leader in telematics and infotainment and pointed to an order backlog of about 90 trillion to 100 trillion won ($58 billion to $65 billion).

LG Display's recovery is central to the upgrade.

"LG Display's strong operating performance and cash flow generation, coupled with a disciplined financial policy, should help the subsidiary materially reduce its debt in the coming years," the press release said.

S&P expects the panelmaker, whose results it folds into LG Electronics on a proportional basis, to keep expanding sales of high-end OLED panels as some customers launch new premium models later this year, steadily lowering its debt.

LG Electronics Magok business center in Gangseo District, western Seoul [NEWS1]

That, with growth in LG's core businesses, is expected to lift free cash flow sharply, to 1.8 trillion won this year and 2.3 trillion won next year, from 149 billion won last year. S&P forecast LG Electronics' adjusted debt-to-EBITDA ratio would improve to 1.2 times this year and 1.0 times next year, from 1.6 times last year, and said it could lower the rating if that ratio rose above 1.5 times.

S&P also flagged risks from the ongoing Iran war. It put LG's direct exposure at 4 to 6 percent of revenue, along with higher raw material and logistics costs, though it said the company should largely offset them. Earlier this year, Moody's, another global rating agency, also raised LG Electronics' credit score one notch, to Baa1 with a stable outlook from Baa2 with a positive outlook.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom. BY KIM KYUNG-MI [cho.yongjun1@joongang.co.kr]