SINGAPORE (ICIS)--LG Chem’s earnings are expected to improve modestly in the second half of this year on the back of new capacity additions and higher sales of value-added products from both its chemical and non-chemical businesses, Moody’s said on Monday.
The South Korean producer last week reported a 42.9% year-on-year drop in its second-quarter net profit to won (W) 227.3bn.
The drop in profitability “was due to the appreciation of the won, persistently moderate chemical spreads, weak earnings in its non-chemical businesses, as well as increased depreciation charges," said Wan Hee Yoo, a Moody's vice president and senior analyst.
In an earnings presentation released last week LG Chem said it expects a gradual recovery in the petrochemicals market in the second half of this year, despite an expected rise in naphtha costs, and expects to enhance its “competitive edge “through high-margin products and differentiated product portfolio.
While LG Chem’s moderate operating performance in the second quarter was credit negative, it will not have an immediate impact on Moody’s “A3” issuer rating and stable outlook on the firm.