By Kim Yoo-chul
LG Chem, the nation’s biggest chemicals company, is expected to see a turnaround in the coming months on the back of a pickup in its battery business headed by former LG Display CEO Kwon Young-soo.
Analysts believe that the company will deliver an earnings surprise to the market for the second quarter, citing a rebound in the price of petrochemical products amid lingering economic uncertainties in China _ the world’s biggest chemicals market.
In the first quarter, the firm witnessed its profit fall by 8.2 percent to 460 billion won from a year ago. Its sales grew only 3 percent to 5.75 trillion won during the same period.
``A rise in oil prices is still weighing on LG Chem,’’ said Hwang Kyu-won, an analyst at TongYang Investment.
Despite the corporate struggles, the company’s battery-making division is emerging as an `` alternative’’ to prevent LG Chem from slipping into further profit squeeze, according to analysts.
The LG Group chairman recently named former LG Display CEO Kwon Young-soo to lead LG Chem’s battery-making division as Kwon was credited for LG Display becoming a top-tier flat-screen maker.
Kwon still hasn’t revealed a detailed business plans. However, his desperate attempts in the battery business have begun paying off.
``We still maintain 470,000 won as our target for LG Chem as the company’s battery-making division is improving in the current quarter,’’ said Baek Young-chan, an analyst at Hyundai Securities, in a note to clients.
A total of 1,462 General Motors’ hybrid electric vehicles (EVs) using LG Chem’s battery packs were sold in April. Between January and February 1,626 were sold, according to Baek.
``Over 21,000 Hyundai Sonata Hybrids are expected to be sold throughout this year, an increase of 21 percent from last year, which is a good signal for LG,’’ said Kwon, adding he is positive that Kia’s Optima ― the U.S. brand of the K5 hybrid model ― will sell more than 15,000 cars this year.
Kwon is meeting with the company’s top clients in Japan, China and the United States in an attempt to find more business chances and to check on current projects.
In a recent meeting with The Korea Times, Kwon said; ``LG’s battery-making division is looking good and will do well. I am confident about the business outlook.’’
However, LG Chem Vice Chairman Kim Bahn-suk was negative on batteries. He said his company will cut this year’s business target on batteries due to slow sales of General Motors’ EVs. LG Chem’s revenue target for car batteries was 800 billion won.
As part of Kwon’s battery initiatives, LG Chem is talking with the German-based chemicals giant BASF to jointly develop advanced and cost-effective batteries with the technological help from the German company, according to LG officials, though an LG Chem spokesman declined to confirm this.
``LG Chem is trying to shift its business focus to more profitable areas. Car batteries is definitely one of them. Kwon will prove his capability to foster LG’s battery business,’’ said an LG source, asking not to be identified.