LG Chem has seen its corporate value surge 12.8 trillion won over ten months. LG Chem shares were traded for 390,000 won per share on the Korean bourse on Sept. 12, an 81 percent jump over 10 months ago. The company saw its capitalization shoot up from 14.74 trillion won to 27.53 trillion won during the period. LG Chem now ranks 6th, a jump from 17th during the period, closing in on companies in the top five.
The reason is owed to LG Chem’s excellent business performance. Securities companies said that LG Chem is projected to see its operating profit jump to about 3 trillion won this year from 1.991 trillion won last year. The company’s strategies to diversify its business portfolio with a focus on value-added products and the restructuring of sagging businesses have paid off, stock analysts said.
Worry has maintained that the global market’s supply glut would come soon as the Korean chemical industry enters a “Super Cycle” boom. In reality, things have changed dramatically. Ethylene prices, which fetched $1,324 per ton in January, plunged to $950 in June. Ethylene, a substance extracted from crude oil, is used for producing a variety of chemical products. Lotte Chemical, Hanwha Chemical, and Kumho Petrochemical saw their operating profit for the 2nd quarter of the year decline whereas LG Chem is on the opposite side, chalking up a record high of operating profit for the 2nd quarter of the year.
LG Chem is less affected by market conditions thanks to a more diversified business portfolio with a focus on value-added products and the restructuring of sagging businesses, analysts stated. LG Chem Vice Chairman Park Jin-soo has continued to stress investments into EV batteries and other new businesses, as well as R&D activities, since taking office as CEO in December 2012. His management tenets have paid off.
LG Chem’s value-added products, including polyolefine, acrylonitrile butadiene styrene (ABS), and engineering plastic, and super absorbent polymer (SAP) reaped 3 trillion won in sales last year, a jump from 2 trillion won in sales in 2013.
“Value-added products are highly profitable and less prone to outside environment changes,” an LG Chem official said.
The company plans to raise sales from value-added products to 7 trillion won by 2020, he added. The diversified business portfolio includes entering such new areas as batteries, information electronics materials and bio.
LG Chem began to mass produce EV batteries in 2009. The battery business division turned a profit for the second quarter of the year tanks to rising orders from the European market. The division is projected to log 1.7 trillion won in sales for this year, a 40 percent jump over last year.