LG Chem (051910) Q2 2024 earnings summary

Executive summary

• Q2 2024 consolidated sales reached KRW 12.3 trillion, up from KRW 11.609 trillion in Q1 2024, but down from KRW 14.336 trillion in Q2 2023.

• Operating profit improved to KRW 406 billion (3.3% margin) from KRW 265 billion in Q1 2024, but below KRW 618 billion in Q2 2023.

• Net income was KRW 60 billion, a sharp decline from KRW 342 billion in Q1 2024 and KRW 671 billion in Q2 2023.

• Improved results over the previous quarter driven by a turnaround in petrochemicals, higher battery materials shipments, and upfront revenue from out-licensing a rare obesity drug.

• Results reflect ongoing business portfolio adjustments, including discontinued and sold businesses.

Financial highlights

• As of Q2 2024, assets were KRW 84 trillion, liabilities KRW 39.9 trillion, and capital KRW 44.3 trillion.

• EBITDA for Q2 2024 was KRW 1.562 trillion, up from KRW 1.351 trillion in Q1 2024, but down from KRW 1.595 trillion in Q2 2023.

• Gross margin was 15.3%, down from 16.4% in Q1 2024 and 16.8% in Q2 2023.

• Cash and equivalents at quarter-end were KRW 7.2 trillion, down from KRW 9.3 trillion in Q1 2024.

• Net debt/equity ratio increased to 39.7% from 35.6% in Q1 2024.

Outlook and guidance

• Battery materials shipment guidance for 2024 revised down from 40% to 20% YoY growth due to OEM production cuts; full-year revenue expected to decline 30% YoY due to lower metal prices.

• Q3 battery materials shipments expected to decline 20% sequentially, but profitability should improve as negative metal price effects lessen.

• Petrochemicals: Gradual recovery in supply/demand expected, but profitability improvement limited by slow global demand and rising freight rates.

• Life Sciences: Profitability expected to decline due to higher R&D costs despite solid sales of major products.

• Energy Solution: Sales to fall short of initial expectations due to slowing EV growth and weak metal prices; operational efficiency to be improved.