South Korea's LG Chem Ltd fourth quarter 2020 profits missed expectations on Wednesday but the company expects surging revenue from its battery unit that supplies Tesla Inc to set the stage for a strong 2021.
The maker of chemicals and batteries, whose wholly-owned battery subsidiary LG Energy Solution supplies Tesla, posted an operating profit of 674 billion won ($610.20 million). That was lower than the 777 billion won in a Refinitiv SmartEstimate derived from 19 analyst estimates but up from a loss of 33 billion won in the same period a year earlier.
With the launches of new electric cars and increased orders for its energy storage system batteries, LG Energy Solution expects revenue to grow more than 50% in 2021 from a year earlier, aiming to ramp up annual capacity to 155 gigawatt-hours of batteries by the of the year, up about 30% from a year earlier, the unit's Senior Vice President Chang Seung-se said in a call with analysts.
(Also read | LG Chem swings to profit on strong demand for electric car batteries)
LG Chem's overall fourth-quarter revenue rose 20% to 8.9 trillion won, the company said in a regulatory filing. LG Energy Solution, which was split off on Dec. 1, reported a fourth-quarter profit of 116 billion won after a loss a year earlier with the unit's revenue up more than 66% from a year earlier.
"LG Chems' mainstay petrochemical business would likely see an increase in demand for their petrochem products as the pandemic situation would likely resolved this year, compared to what we saw in 2020," said Kang Dong-jin, an analyst at Hyundai Motor Securities, adding that continued demand for chemical materials used for hygiene products would help as well.
In the fourth quarter, the petrochemical business unit reported operating profit of 569 billion won, down from the third quarter's 722 billion won but up from 316 billion won a year earlier.
LG Chem said on Wednesday it restarted its naphtha cracker at Yeosu on Jan. 18 and aims to operate it at full capacity this week.
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The cracker, which can produce 1.2 million tonnes per year of ethylene for use in plastics and fibres, shut in November after a fire.
Fourth-quarter profits were impacted as funds were set aside to cover the costs of two battery recalls, LG Chem Vice President Yoon Hyun-seok said on the call without the amount.
Those include the recall of Hyundai Motor Co's Kona Electric, which uses LG Energy Solution batteries, as well as a recall of LG Energy Solution's residential energy storage batteries in the United States.
LG Chem saw strong demand for its electric car batteries last year. That helped the battery business swing to a profit for the first time in the April to June quarter backed by global automakers' shift from the combustion engine to electric vehicles to comply with environmental regulations.
LG Chem shares, which rose nearly 160% last year, closed down 2.3% versus the broader KOSPI's 0.6% fall.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.