LG Chem's Q3 operating profit falls 17.4% on year to W561.2b

LG Chem posted consolidated sales of 15.5 trillion won ($11.6 billion) and operating profit of 561.2 billion won in the third quarter of this year, the company announced Thursday.

Sales rose 34 percent from a year earlier, while operating profit fell 17.4 percent over the same period. Compared with the previous quarter, sales grew 9.3 percent and operating profit edged down 6.4 percent.

"Despite market uncertainty stemming from rising oil prices and greater raw material price volatility, overall earnings remained stable, supported by improved profitability in advanced materials and energy solutions," Chief Financial Officer Cha Dong-seok said. "We will strengthen profitability and business competitiveness by expanding high-value businesses and restructuring our operations, while continuing to pursue shareholder return measures."

The petrochemical division recorded sales of 4.75 trillion won and an operating loss of 175.6 billion won in the third quarter. The segment swung to a loss due to narrowing spreads on key products from raw material cost lag effects, higher freight costs and a weaker exchange rate.

The advanced materials division posted sales of 1.07 trillion won and operating profit of 39.7 billion won. Both sales and profitability improved quarter-on-quarter, driven by higher battery materials volumes, a one-time gain and solid results in electronic materials for semiconductors and automobiles.

The life sciences division recorded sales of 337.3 billion won and operating profit of 23.2 billion won. Sales and profitability declined from the previous quarter due to lower export shipment volumes and higher research and development costs. In the fourth quarter, the division expects improvement as export shipments of vaccines and certain other products are concentrated in the period and an additional upfront payment is anticipated following an amendment to a license-out agreement for a rare obesity treatment.

Subsidiary Farm Hannong posted sales of 100.3 billion won and an operating loss of 20.7 billion won. Sales of crop protection products and seeds increased, but overall sales and profitability edged down from a year earlier due to a base effect from advance fertilizer purchases in the first half.

For the fourth quarter, LG Chem expects the petrochemical division to face headwinds from high oil prices tied to geopolitical risks and opportunity losses from a scheduled maintenance shutdown at the No. 1 naphtha cracking center in Yeosu. The company said it will continue efforts to improve profitability through expanded sales of high-value products and cost reductions.

The advanced materials division is expected to see higher sales on increased battery materials volumes, though profitability is forecast to remain at a similar level due to a base effect from the one-time gain recorded in the previous quarter.

Farm Hannong's fourth-quarter earnings are expected to decline from a year earlier despite expanded overseas sales of crop protection products, as lower fertilizer sales and higher research and development costs weigh on results.