MOSCOW (MRC) -- LG Chem's operating profit fell 60% in 2019 to 895.6 billion won (USD750 million), as it spent around 320 billion won to prop up its ailing battery business, reported NIKKEI Asian Review with reference to the company's statement Monday.
The South Korean chemical and battery maker was hit hard last year by problems with its energy storage systems, a number of which caught fire in South Korea. The batteries are designed to store electricity generated by solar and wind power systems.
LG Chem's sales of batteries for electric vehicles rose. Overall, the company's revenue increased 2% to 28.6 trillion won. However, operating profit fell for the second straight year.
The petrochemical business, which accounts for 54% of the company's sales, produced an operating profit of 1.42 trillion won. But the battery operations, which contribute less than 30% of sales, lost 454.3 billion won.
Despite the setbacks, LG Chem continues to invest heavily in EV batteries, including a joint venture with U.S. automaker General Motors to build a new factory that will produce batteries for electric cars. LG Chem forecasts battery sales will rise 79% to 15 trillion won in 2020, which would put the business on par with the petrochemical operations.
The company faces tough competition from Chinese rivals in EV batteries, weighing on its profitability, in addition to weak demand for smartphone batteries. In the EV battery market, China's Contemporary Amperex Technology Co. Ltd. and BYD are spending heavily on development and manufacturing, in tie-ups with big automakers.
As MRC wrote previously, LG Chem, a South Korean petrochemical major, has reduced its operational rates of its cracker to around 90-95% starting January 2020 due to weaker economic fundamentals. Based in Daesan, South Korea, the cracker is able to produce 1.27 million tons/year of ethylene and 650,000 tons/year of propylene.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).
LG Chem Ltd., often referred to as LG Chemical, is the largest Korean chemical company and is headquartered in Seoul, South Korea. According to ICIS report, it is 15th biggest chemical company in the world in 2011. It has eight domestic factories and global network of 29 business locations in 15 countries. LG Chem is a manufacturer, supplier, and exporter of petrochemical goods, IT&E Materials and Energy Solutions.
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