LG Group, 'Electronics' Defensive Power Draws Attention Amid 'Chemical' Crisis

[Korea Financial Times, Gwak Horyung] LG Group's affiliates, having received their report cards for the first quarter of this year, are being evaluated as having performed well despite challenging business conditions.

In particular, the profitability defense of the electronics affiliates stands out compared to the struggling chemical sector.

Specifically, electronics affiliates such as LG Electronics, LG Display, and LG Innotek recorded a combined Q1 revenue of KRW 28.8041 trillion and an operating profit of KRW 1.2925 trillion. The operating margin was 4.5%. The annual operating margins for LG's electronics affiliates were 1.3% in 2022, 1.0% in 2023, and 2.5% in 2024.
The reason for the rebound in operating margin is the turnaround to profitability by LG Display. LG Display swung from an operating loss of KRW 469.4 billion in Q1 last year to an operating profit of KRW 33.5 billion in Q1 this year. This is the first quarterly profit for the company in three years.


Chemical affiliates such as LG Chem, LG Household & Health Care, and LG Energy Solution posted a combined revenue of KRW 13.8689 trillion and operating profit of KRW 589.3 billion. The operating margin was 4.2%, lagging 0.3 percentage points behind the electronics affiliates. It is positive that they succeeded in rebounding their profitability. The annual operating margins for chemical affiliates were 6.3% in 2022, 4.9% in 2023, and 2.5% in 2024, showing a downward trend.

This was largely due to the operating profit of LG Energy Solution, which increased 138% from KRW 157.3 billion in Q1 last year to KRW 374.7 billion in Q1 this year.

However, the operating profit of LG Energy Solution includes a KRW 457.7 billion tax credit from the U.S. IRA. Excluding the subsidy, the company actually posted an operating loss of KRW 83 billion, which remains a concern.
LG Chem also saw its core petrochemical division's operating loss widen to KRW 56 billion, about double from a year earlier. Despite cost-cutting efforts, factors such as rising electricity rates contributed to the deterioration in profitability.

Meanwhile, LG Group has decided not to hold its annual strategy briefing, usually chaired by Chairman Koo Kwang-mo in the first half of the year to review future strategies. It is assessed that this decision reflects Chairman Koo's judgment that, amid growing global uncertainties, it is more necessary to swiftly execute existing strategies rather than discuss new ones.

LG Chem also saw its core petrochemical division's operating loss widen to KRW 56 billion, about double from a year earlier. Although cost-saving efforts were made, the company explained that factors such as rising electricity prices contributed to the deterioration in profitability.

Meanwhile, LG Group has decided not to hold its annual strategy briefing, usually chaired by Chairman Koo Kwang-mo in the first half of the year to review future strategies. It is assessed that this decision reflects Chairman Koo's judgment that, amid growing global uncertainties, it is more necessary to swiftly execute existing strategies rather than discuss new ones.

Gwak Horyung (horr@fntimes.com)