(2nd LD) LG Chem vows to expand investment after reporting record high Q1 earnings on EV battery sales
(ATTN: REVISES headline, lead; UPDATES with more details, comments in paras 10-18; ADDS photo)
By Kim Eun-jung
SEOUL, April 28 (Yonhap) -- LG Chem Ltd., South Korea's leading chemical firm, said Wednesday its first-quarter net profit rose to the highest level ever on strong electric vehicle (EV) battery sales, vowing to step up investment in the battery and related materials to further propel growth.
LG Chem's net profit came to 1.4 trillion won (US$1.2 billion) in the January-March period, skyrocketing from a net profit of 36.3 billion won a year earlier, the company said in a regulatory briefing.
Operating profit jumped 584 percent on-year to 1.4 trillion won in the first quarter, and sales soared 43.4 percent on-year to 9.6 trillion won over the period, both marking record-high quarterly results, the firm said.
LG Energy Solution Ltd., the firm's wholly-owned battery subsidiary, booked 4.2 trillion won in sales and 341.2 billion won in operating profit in the first three months of the year, driving up overall profits.
LG Energy Solution is a major supplier of batteries for nearly all major global carmakers, including Tesla, General Motors, Ford, Renault, Volvo and Volkswagen, as well as South Korea's two largest automakers -- Hyundai Motor and Kia Corp.
LG Chem said the battery subsidiary posted a strong performance thanks to robust EV battery demand and enhanced manufacturing efficiency.
LG Chem said it expected sales growth in EV batteries and cylindrical battery products in the second quarter in line with brisk EV sales.
"Despite the uncertain business environment, the company reorganized its business structure and kept investing in new growth drivers to create sustainable income sources," Chief Financial Officer Cha Dong-seok said during a conference call, vowing to foster battery materials as the main growth driver.
The mainstay petrochemical unit generated 4.4 trillion won of revenue with solid demand and higher margins, and the advanced material division logged 1.2 trillion won in sales with expanded production of cathode materials used in EV batteries, the firm said.
LG Energy said it will expand investment to grab a bigger share of EV battery and energy storage system (ESS) markets in the U.S., which are expected to rapidly grow under the Joe Biden administration's eco-friendly policies.
The company has vowed to step up its EV battery business in the U.S. after settling a two-year-long trade secret suit over EV battery technology earlier this month with its smaller home rival SK Innovation Co. SK Innovation agreed to pay 2 trillion won to LG Energy.
LG Energy operates a lithium-ion battery factory in Michigan and is building a new factory in Ohio through its joint venture with U.S. automaker General Motors, Ultium Cells, which will be completed in 2022.
Most recently, its joint venture announced a $2.3 billion investment plan to build a second EV battery factory in Tennessee.
LG Energy said automakers' in-house battery production plan could impact its future deals with major clients, including German automaker Volkswagen, but maintained a positive outlook on its existing partnership with major industry players.
"There are many barriers for new entrants because the battery business needs various core technologies, patents and manufacturing knowhow," Jang Seung-se, a senior vice president at LG Energy Solution, said in a conference call.
"As automakers could find it hard to internalize all of their battery needs, they will have to maintain partnerships with battery makers to disperse sourcing risks."
To build cost-effective battery products with higher-energy density, LG Energy said it has been studying low-cost battery chemistry, simplifying the battery design, securing a stable supply of raw materials to better compete with its rivals.
"As the size of the battery material market is large and still growing, we are considering additional items and will actively pursue new business opportunities via joint ventures and M&As," Jang said. "We will announce detailed plans in the next quarter or the third quarter at the latest."
Shares in LG Chem inched down 0.11 percent to 890,000 won on the Seoul bourse, outperforming the broader KOSPI's 1.06 percent slide. The earnings results were released after the market closed.
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