LG Chem's Q2 operating profit rises 25.8% on improved petrochemical margins

LG Chem posted consolidated sales of 14.18 trillion won ($9.84 billion) and operating profit of 599.6 billion won in the second quarter, the company announced Friday. Sales rose 19 percent year-on-year, while operating profit climbed 25.8 percent.

The earnings rebound was driven by a favorable inventory lagging effect — the time gap between raw material input costs and product pricing — in the petrochemical division, which improved margins on key products, as well as stronger sales of major products in the advanced materials and life sciences segments.

The petrochemical division recorded sales of 5.33 trillion won and operating profit of 426.5 billion won. Product sales volumes declined due to the shutdown of the No. 2 naphtha cracking center in Yeosu, but a positive inventory lagging effect boosted profitability. Business uncertainty is expected to persist in the third quarter, weighed by a negative lagging effect from falling raw material prices.

The advanced materials division posted sales of 999 billion won and operating profit of 19.9 billion won, staging an earnings recovery as mass production of new electronic materials got under way. Sales are expected to grow in the third quarter, supported by expanded cathode material shipments to new customers and a gradual increase in separator sales for ESS applications.

The life sciences division recorded sales of 369 billion won and operating profit of 60 billion won. Both sales and profitability rose quarter-on-quarter, driven by higher export shipment volumes. Third-quarter sales are expected to dip slightly, as exports of some products — including vaccines — are anticipated to concentrate in the fourth quarter. A decline in profitability is also expected due to higher research and development costs.

Subsidiary LG Energy Solution posted sales of 7.56 trillion won and operating profit of 113.3 billion won, returning to the black. Sales grew on solid demand for cylindrical and pouch batteries for electric vehicles and expanded ESS production capacity in North America. The subsidiary expects further sales growth in the third quarter, driven by accelerating ESS market expansion in North America and steady increases in EV battery shipments.

Subsidiary Farmhannong posted sales of 274.1 billion won and operating profit of 25.4 billion won. Sales and profitability improved year-on-year, boosted by advance fertilizer purchases stemming from the Middle East war. In the third quarter, profitability is expected to decline year-on-year due to rising raw material costs from a high exchange rate and increased R&D expenses.

Cha Dong-seok, LG Chem's chief financial officer, said the company would "continue shifting existing businesses toward higher value-added products and build a stable earnings base by nurturing future growth businesses, including semiconductor and mobility materials."