MOSCOW (MRC) -- LG Chem, Ltd.'s robust operating results for 2Q 2015 support the company's A3 issuer rating and stable outlook, said Moody's Investors Service in its statement.
"Despite the weaker performance of its non-chemical businesses, LG Chem reported a robust operating performance in Q2 2015, due to the strong performance in its core chemical business," says Wan Hee Yoo, a Moody's Vice President and Senior Analyst.
According to the company's announcement on 17 July 2015, LG Chem's consolidated operating income for 2Q 2015 grew 57% year-on-year to KRW563 billion from KRW360 billion in 2Q 2014. The increase was mainly due to strong product spreads in its petrochemical business, despite losses in its rechargeable battery business.
The company's reported net debt fell to KRW872 billion at end-June 2015 from KRW1.2 trillion at end-2014, as its modest working capital surplus and robust earnings led to positive free cash flows.
"We expect LG Chem's financial leverage to improve over the next 1-2 years, driven by improved earnings and a gradual decline in debt," adds Yoo.
Moody's expects LG Chem's core petrochemical spreads to soften over the next 6-12 months, from the very strong levels seen in 2Q 2015. Nevertheless, product spreads should continue to remain modestly stronger than the levels achieved in 2014.
Based on Moody's expectations on LG Chem's petrochemical product spreads and assumption of stable crude oil prices, Moody's anticipates that LG Chem's adjusted EBITDA will grow by about 20% year-on-year in 2015.
In addition, LG Chem's debt levels should fall gradually over the next 1-2 years, due to management's prudent investment strategies.
LG Chem, Ltd. is a major Asian producer of a diverse mix of commodity and specialty chemicals, including olefins, polyolefins, ABS, engineering plastics, acrylate, plasticizers, synthetic rubbers, PVC and specialty polymers. The company is also a global producer of LCD panel materials and rechargeable batteries. Its revenues totaled KRW22.6 trillion (USD21.4 billion) in 2014, with its chemical business accounting for about 76% of consolidated revenue during the same period. The company operates 18 manufacturing locations in six countries.
MRC