01 February 2012 06:54 [Source: ICIS news]
SINGAPORE (ICIS)--The fourth-quarter earnings of South Korea’s LG Chem were broadly in line with expectations and will not have any impact on its A3 issuer rating and stable outlook, ratings agency Moody’s Investors Service said on Wednesday.
The producer reported on Tuesday a 12.7% year-on-year fall in its fourth-quarter 2011 net profit to won (W) 381.8bn ($339.3m).
The company’s sales in the fourth quarter of last year rose by 12.1% year on year to W5,605bn, while its operating profit dropped by 9.9% to W506.7bn.
"The lower operating income was driven primarily by worsening operating fundamentals for major petrochemical products,” said Chris Park, a vice president and senior credit officer at Moody’s.
“This was partly mitigated by the relatively strong performance of the information & electronic materials business," Park said.
"However, despite the uncertainties related to macroeconomic conditions globally, the company's robust financial profile continues to provide a considerable headroom for the A3 rating," he added.
The company’s relatively strong performance compared with other domestic petrochemical players in the fourth quarter of last year highlights its business stability, driven by its broad diversification in products and end-markets, according to Moody’s.
LG Chem's debt rose by about 20% year on year in 2011 on a reported basis, mainly due to the large capital expenditure and working capital deficits that stemmed from elevated raw material prices, it said.
The ratings agency added that it expects the additional growth in capital expenditure to lead to an increase in LG Chem's debt over the next couple of years.
($1 = W1,125.30)
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