Bo-eun leads the digital content team. She has covered foreign affairs, North Korea, tech, economy and gender issues at The Korea Times. She did a short stint at the South China Morning Post in Hong Kong, where she obtained a new perspective on news production and life. Small sources of joy for her are lounging in the sun, having a good latte and swimming.
Expectations rise over LG's growth via split-off
LG Group's headquarters on Yeouido in Seoul / Yonhap
By Kim Bo-eun
By Kim Bo-eun
Market expectations have been rising over the future growth trajectory of LG Corp. as the holding company prepares for a split. The decision to separate LG affiliates by setting up a new holding entity under the leadership of LG Chairman Koo Kwang-mo's uncle Koo Bon-joon was unveiled last November.
The new holding group, set to be named LX, will have under its arm: trading affiliate LG International, materials manufacturer LG Hausys, fabless chipmaker Siliconworks, chemical manufacturer MMA and logistics unit Pantos. LG said the decision to reorganize its corporate governance structure was made to strengthen its global competitiveness by beefing up the expertise of its respective businesses.
Koo Bon-joon
Following LG's announcement, LG Corp.'s share price has spiked, reaching an all-time high of 115,500 won on Jan. 21. This compares with its 74,500 won share price on Nov. 13, before the announcement. LG's stock closed at 90,400 won per share, Monday.
LG attributes the rise to the restructuring of its businesses to focus on new growth engines including auto parts, electric vehicle (EV) batteries and artificial intelligence (AI). LG's plan unveiled in December to set up a joint venture with Canadian auto parts maker Magna International and LG Chem's spinoff the same month of its EV battery business into a separate entity, LG Energy Solution (LGES), have fueled the momentum.
LG Corp. is set to continue focusing its resources and capabilities in LG Electronics' auto parts business, LG Display's OLED panels and LG Energy Solution's EV batteries. The holding company also plans to invest heavily into new technologies and business areas, including AI, big data and 5G.
This is part of the LG chairman's drive to restructure the group's portfolio. LG has made moves to dispose of businesses considered less central ― such as the liquidation of LG Electronics' fuel cell business and the sale of its water treatment business in 2019 and LG Chem's sale of its LCD polarizer business and the telecom unit LG Uplus' sale of its payment gateway business last year.
After Koo took the helm in 2018, LG acquired automotive lighting company ZKW, industrial robot manufacturer Robotstar and data analysis firm Alphonso.
Koo Kwang-mo
The rise in LG's stock price is also seen to have been driven in 2020 by solid earnings of major affiliates including LG Electronics, LG Chem and LG Household & Health Care despite the spread of the COVID-19 pandemic, the company said. Operating profit combined with LG's 13 listed affiliates in 2020 grew by 81 percent year-on-year.
LG Corp. posted 6.63 trillion won in revenue and 1.7 trillion won in operating profit last year, a respective 1.5 percent and 71.2 percent growth from a year earlier.
The upward momentum is expected to continue, based on the group's plans for new investments, and M&As, as well as an increased focus on environmental, social and corporate governance (ESG) values, including policies seeking greater shareholder returns.
LG Corp. in February 2020 unveiled plans to pay at least 50 percent of the holding company's net profit as dividends. LG Corp. and its affiliates are also reviewing setting up an organization to introduce an ESG-based management system. Five affiliates, meanwhile, appointed female outside directors on its board this year, as a means to enhance their diversity.
"When the split-off that enhances shareholder value through strengthening expertise of businesses is finalized at the shareholders' meeting later this month, LG's growth will accelerate," NH Investment & Securities analyst Kim Dong-yang said.
The new holding company will be launched on May 1, after the plan is approved at a general shareholders meeting on March 26.