Posted : 2010-07-20 17:21
Updated : 2010-07-20 17:21

LG Chem strikes quarterly record profit

LG Chem CEO Kim Bahn-suk
By Kim Yoo-chul
Staff reporter

LG Chem, South Korea’s top chemical company, is consistently rewriting its records. A surge in asset values and a rare visit by U.S President Barack Obama to its Holland, Mich., plant has helped. Its second quarter record appears to be the icing on the cake.

On Tuesday, LG Chem said it posted 5.028 trillion won in sales during the April-June period, while the operating profit for the latest quarter reached 827.9 billion won. Net profit was 645.7 billion won.

Based on year-on-year comparisons, sales rose by 31.3 percent, while operating profit increased by 31.6 percent. Net profit was up by 36 percent, the LG affiliate said in a regulatory filing to the Korea Exchange (KRX).

The reports were above those forecast by market analysts. The median forecast of eight local brokerages for LG Chem’s second quarter sales was 4.74 trillion won. Operating profit had been expected at 731 billion won

Despite the upbeat quarterly report, shares of LG Chem was slightly behind by 1.23 percent to end at 321,500 won on the nation’s main bourse, according to its operator KRX.

Continued healthy demand for petrochemical-related products in emerging markets including the Middle East and India and an increased portion of its premium lines have helped it lift quarterly sales, LG said in the filing.

A sustainable growth in demand for advanced televisions such as LED-backlit LCD TVs from developed markets to China and the supplemented expansion of its rechargeable batteries were another contributor.

``That was satisfactory. We’ve filed another impressive quarterly return and are seeing no big hurdles until the end of this year,’’ said C.S. Song, a company spokesman said.

In detail, the operating profit in its petrochemicals segment rose 22 percent year-on-year, while sales were 3.76 trillion won ― an increase of 32.2 percent during the same period.

LG’s Song said prices of polyolefin (PO) products were maintained added the strong demand for acrylonitrile butadiene styrene backed by Beijing’s economic growth paid off.

Information and electronic materials operating profit hiked 70.9 percent on the back of an increased presence in the global market.

The figures have been consolidated. LG Chem started to use the International Financial Reporting Standards, or IFRS, accounting measurement from the first quarter. Year-earlier figures are also calculated based on the same accounting standard.

Frenzy to continue

The earnings frenzy is expected to continue in the third quarter as the petrochemical and electronics markets will enter their boom season.

Usually, earnings for component-making companies reach their peak either in the second or third quarter as the component-related segments are highly cyclical and volatile, following up-and-down moves depending on the season.

``Our petrochemical unit will maintain the current strong run in the following quarter. Meanwhile, the information and electronic materials unit has been expanding its production capacity to meet the rising demand for electric cars and other high-end portable devices,’’ said Song of LG.

LG Chem is slightly worried over the possible oversupply in the PO sector as market leaders are ramping up production attracted by signs of economic recovery.

Market analysts expect LG Chem to continue the upbeat mood in rechargeable batteries and petrochemical products, but they stepped back to paint a positive outlook in the company’s LCD-related business.

``Growth potential for LG’s information materials business is high enough to offset any uncertainties in other businesses,’’ said Ahn Sang-hee, an analyst at Daishin Securities.

UBS, a Switzerland-based brokerage, said LG will suffer some difficulties in its LCD glass business as the global LCD industry is seeing some signs of oversupply approaching the latter half of this year.

LG Chem’s total asset value was raised as the nation’s fifth with minor differences with the No. 4 Shinhan Financial Group. It struck large battery supplement deals with major carmakers including General Motors, Ford, Volvo and Hyundai-Kia Motors.

LG Chem CEO Kim Bahn-suk said the company will expand the number of clients for batteries to 10 by the end of this year.
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