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Market expectations for LG Chem, Samsung SDI mixed amid stumble in battery biz

2017.05.08 13:54:54 | 2017.05.09 13:28:17
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Market expectations for Korea’s two leading lithium-ion battery makers LG Chem Ltd. and Samsung SDI Co. are mixed due to setback in battery business in China, the world’s largest electric vehicle market, and slower-than-expected pickup in the global demand for rechargeable batteries.

LG Chem is expected to fare better thanks to its diverse portfolio.

The company that also runs chemical and bioengineering businesses posted 796.9 billion won ($703 million) in operating profit for the first three months this year, 11 percent higher than the market consensus of 718.6 billion won. Its sales reached 6.49 trillion won, also beating the market expectation of 6.28 trillion won.

On the other hand, Samsung SDI recorded operating loss of 67.3 billion won over the same period, doing worse than the market consensus of 47.5 billion won.

LG Chem delivered its best quarterly performance during the first three months of 2017 in six years thanks to robust demand in its chemical business and information and electronics materials business that generated its first profit in four quarters. Its pesticides and fertilizer making subsidiary Farm Hannong and the life science business also did better.

“Supply of LG Chem’s mainstay product acrylonitrile butadiene styrene (ABS) has become short on seasonal demand, sending the unit price up from $1,570 per tonnage in the previous quarter to $1,895,” said Noh Woo-ho from Meritz Securities.

The company’s secondary battery business, however, remained in the red, posting 10.4 billion won in operating loss. “The battery business suffered drop in sales due to the low seasonal demand, but could improve in the latter half,” said Lee Dong-wook from Kiwoom Securities.

According to market data provider FnGuide, LG Chem’s operating profit could soar 36.4 percent from the previous year to 2.72 trillion won this year, and sales 22.9 percent to 25.38 trillion won.

Samsung SDI with mainstay in secondary battery struggled during the first quarter, extending its losing streak for the sixth consecutive quarter. The company has been reeling from a series of setbacks caused by defect in batteries supplied to Samsung Electronics’ fire-prone Galaxy Note 7, China’s excluding of Korean makers from state subsidies for electric vehicle (EV) batteries, and uncertain outlook for mid- to large-sized battery business.

“Delayed release of Galaxy S8 smartphones caused losses in the small battery segment. The mid to large-sized battery business also did poorly,” said Gwon Sung-ryul from Dongbu Securities. The company also suffered from the temporary shutdown of its Tianjin factory in China due to fire in February,” he added.

It will be helped by recovery in demand towards the end of the year and supplies to Samsung Electronics’ Galaxy S8 and Apple’s iPhone 8 released in the latter half.

Shares of LG Chem closed Monday at 280,000 won, up 1.45 percent or 4,000 won from the previous session, while those of Samsung SDI finished at 142,000 won, up 2.16 percent or 3,000 won in Seoul trading.

By Yoon Jin-ho

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]

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