South Korea’s top secondary battery maker LG Chem Ltd. on Wednesday reported a nearly 60 percent drop in first-quarter operating profit year on year mainly due to one-off expenses related to its fire-prone energy storage system whose sale has been suspended.
LG Chem said in a regulatory filing on Wednesday that its operating profit for the January-March period fell 57.7 percent to 275.4 billion won ($239 million) from a year ago and 4.9 percent from a quarter ago. Revenue edged up 1.3 percent to 6.64 trillion won on year, while net profit reached 211.9 billion won, down 61.7 percent on year.
The company’s operating earnings missed the market estimates, and its shares ended 2.56 percent lower at 361,500 won on Wednesday.
LG Chem’s mainstay basic materials and chemicals business saw its profit improve thanks to the recovering spread, the difference between the price of petrochemical products and raw material costs. But a big loss in its battery division more than erased the gains from other businesses, said Jung Ho-young, president and chief operating officer at LG Chem, in a press release.
LG Chem’s battery unit logged an operating loss of 147.9 billion won on sales of 1.6 trillion won due to one-off costs caused by a series of fires on ESS and weak seasonal demand in batteries for vehicles and information technology devices.
The company set aside reserves of 80 billion won to cover losses from fires caught in its ESS units. It has also stopped shipping its ESS in the domestic market.
The company’s petrochemicals business, however, raked in 398.6 billion won in operating income on sales of 3.7 trillion won thanks to strong restocking demand and stabilized raw material costs. Operating profit fell 33.4 percent and sales 8.6 percent from a year ago, mainly due to maintenance expense on LG Chem’s naphtha cracking center (NCC) in Daesan, South Chungcheong Province.
Advanced materials business raised 3.5 billion won in operating income on sales of 1.2 trillion won and life science unit 11.8 billion won in operating profit on sales of 143.5 billion won.
Despite lingering uncertainties from the rising oil prices, Jung expected that the company’s earnings would improve in the second quarter as the maintenance work at the chemical unit’s naphtha cracking center (NCC) facility is due to be completed and demand for batteries for second-generation electric vehicles is expected to grow.
Jung also noted that the company’s battery business will be able to raise 10 trillion won in sales this year as targeted, 15 trillion won next year, and 20 trillion won in the following year.
By Lee Eun-joo
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]