S&P ups LG Chem’s corporate credit rating

By Kim Yoo-chul

S&P rating agency has upgraded its corporate credit rating on LG Chem to A- from BBB+, citing its solid market position in the petrochemical, and information and electronic materials sectors.

LG Chem now has the highest corporate credit rating among Korean petrochemical companies, according to the company.

``The outlook on the long-term corporate credit rating is stable. The upgrade reflects sustained improvements in LG’s financial risk profile, such as robust cash flow generation and lower leverage,’’ said Han Sang-yun at S&P, Thursday.

The debt ratio of LG Chem was lowered to 63 percent as of the end of third quarter this year from 78 percent late last year.

Meanwhile, it aims to earn 2.5 trillion won in operating profit for the whole of this year, up from 2.1 trillion in 2009, said LG Chem spokesman C.S. Song.

S&P added LG’s relatively solid and stable profitability is due to its strong market position and well-diversified business portfolio, which both offset the cyclical industry risk to an extent, causing it to get a better-than-expected EBITDA margin of 18 percent, last year.

``It has also a leading share in the global LCD polarizer market and third-largest share in the lithium-ion batteries market. LG has a vertically integrated production structure,’’ the agency said.

On the other hand, the rating is limited by exposure to oil prices and currency fluctuations and the lack of cost competitiveness and global scale in the cyclical petrochemical industry.

``The rating upgrades will help us issue overseas corporate bonds with favorable conditions, solidifying our international recognition,’’ said Song.

LG Chem is the top supplier of lithium-ion batteries used in hybrid electric vehicles (EVs) to leading global carmakers, including General Motors, Ford, Volvo and Renault. It plans to boost the number of its battery customers to 10 by the end of the year from the current eight.

With its traditionally-strong petrochemical businesses, the LG Group’s chemical affiliate is also boosting its profile in LCD glasses and films used in flat-panels as an alternative revenue sources.