(ATTN: UPDATES share prices at bottom)
By Kim Kwang-tae
SEOUL, Sept. 17 (Yonhap) -- LG Chem Ltd., South Korea's leading chemical company, said Thursday it has decided to spin off its battery business in a move to further strengthen its leading position in the sector amid growing demand for electric vehicle (EV) batteries.
The new entity -- tentatively called LG Energy Solutions and to be wholly owned by LG Chem -- is set to be launched Dec. 1, LG Chem said in a regulatory filing
"We believe it is the right time to spin off (the battery business unit) as the electric vehicle battery business began to yield a sizable profit amid the rapid growth of the battery industry," the company said in a statement released after an emergency board meeting.
LG Chem's battery business unit achieved an operating income of 155.5 billion won (US$132 million) in the second quarter on quarterly record sales of 2.82 trillion won, all record figures so far.
LG Chem said sales of the new entity could come to about 13 trillion won this year before reaching more than 30 trillion won in 2024.
LG Chem said it needs to secure massive capital for investment at a time when it spends more than 3 trillion won in facility investment per year.
LG Chem said it will study the possibility of an initial public offering of the new entity, though no decision has been made yet.
The company has also said its order backlog for EV batteries is currently valued at more than 150 trillion won.
The EV battery market has been on a roll as automakers around the world race to go electric and eco-friendly due to tightened regulations on greenhouse gas emissions, which scientists say are to blame for global warming.
LG Chem is a key supplier of batteries for electric vehicles, including those of GM, Ford, Renault, Volvo, Audi, Volkswagen and Daimler, as well as South Korea's largest carmaker, Hyundai Motor Co., and its smaller affiliate, Kia Motors Corp.
LG Chem has said it is on track to boost its production capacity to 100 gigawatt hours by the end of this year, which is enough to supply batteries for about 1.7 million electric cars.
LG Chem was the largest supplier of EV batteries in the first seven months of this year with a 25.1 percent share, according to market tracker SNE Research.
SNE Research attributed the hike to robust sales of the Tesla Model 3, the Renault Zoe EV and others that are powered by LG Chem's EV batteries.
Shares in LG Chem fell 6.11 percent to 645,000 won, underperforming the broader KOSPI's 1.22 percent decline.
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