LG Chem positive about business outlook
CFO expects car battery business to turn profitable next year
By Kim Yoo-chul
LG Chem Chief Financial Officer Cho Suk-jeh speaks during an interview at his office in Yeouido, Seoul, Monday. / Courtesy of LG Chem
LG Chem Chief Financial Officer (CFO) Cho Suk-jeh expects a steady improvement in the company’s bottom line this year on growing demand for its key chemical products.
He said stabilizing oil prices and a turnaround in car batteries will also bolster its earnings.
“In terms of our business perspective, it’s like spring finally arrived. This year will be a lot better for LG Chem. As a diversified chemical company, we see further growth potential in our chemicals, glasses and automotive battery businesses,” the LG Chem CFO said in an interview with The Korea Times at his office in Yeouido, Seoul, Monday.
The company suffered a drop in profits in its chemical products amid plunging oil prices.
Cho is positive about the overall business outlook this year thanks to its greater exposure to top-notch chemical products and growing demand for batteries used in mobile devices and cars.
He said the company wants to achieve a “double-digit” profit margin.
“Making the most of our vertically integrated portfolio in chemicals, we are going to launch aggressive marketing in China where demand for basic feedstock used in chemical products is growing,” Cho said.
As part of its moves to minimize the negative impact from volatility in oil prices, Cho said LG Chem has stepped up efforts to cut costs.
He said international oil prices may not fall further substantially given the industry’s trend to reduce investments in shale gas.
“Major oil producers have cut their investment in shale gas amid low oil prices. The overall petrochemical industry is obviously stabilizing,” Cho said.
Battery outlook positive
The CFO said its automotive battery business will begin posting profits from next year as the electric vehicle market is ready to grow.
“Our automotive battery business will reach a break-even point by late this year. From next year, this business will turn profitable as car manufacturers release upgraded versions of electric vehicles,” said the CFO.
LG Chem is the world's biggest automotive battery producer. It supplies batteries to more than 20 global carmakers such as Ford, General Motors and Renault. It runs three big battery plants in Nanjing, China; Ochang, Korea and Michigan in the United States.
Cho said its battery lines in the United States “will be fully operational” late this year.
“We are considering constructing an additional line in the Michigan factory. LG Chem is on track to hire more to back up the moves,” Cho said.
The CFO said that it is in talks with carmakers in Europe and China to supply more automotive batteries, though the executive refused to identify its clients.
“The automotive battery market has huge technological barriers and that means the market is being rationalized with a small number of major suppliers,” Cho said. “It’s fair to say that the industry sees signs of consolidation. LG Chem is ideally positioned to benefit most.”
Cho said its capacity expansions, growing orders for polarizer films and small and medium-sized rechargeable batteries for mobile devices will combine to boost its earnings.
He said its car battery business has a huge growth potential.
“After years of difficulties, the automotive battery business will open a new era for us,” Cho said.
As the company CFO, the executive pledged the company will further strengthen shareholder-friendly steps.
“As a market leader, yes, if we report greater profits, then we will pay more dividends. This is the principle that can’t be compromised,” Cho said.
Asked about the company’s plans on new businesses, the CFO identified OLED lightening, water treatment and other advanced materials.
“These businesses are on track to growth. It’s too early to talk about when they will make profits. But they will certainly bolster our bottom line going forward,” the executive said.
He said the company will pursue profitability over volume expansion. “We will put a greater focus on quality growth,” he said.
On Monday, a number of brokerage houses upgraded their target price for LG Chem, citing stronger earnings outlook in the coming quarters.
The stock closed up 22,000 won or 8.41 percent at 283,500 won, while the benchmark KOSPI closed up 0.15 percent at 2,146.71 points.
LG Chem is the nation’s top chemical company in terms of sales. Its main products are basic chemical materials as well as high-performance polyethylene and polypropylene products.