By Heekyong Yang and Joyce Lee
SEOUL (Reuters) -South Korea’s LG Chem Ltd on Thursday posted a four-fold surge in quarterly profit on pandemic-led demand for its chemicals used in making electronic products such as laptops and TVs, and said sales of batteries used in electric vehicles were improving.
The company’s LG Energy Solution business, a supplier of batteries used in EVs made by General Motors Co and Tesla Inc, has thrived on growing demand for such cars in Europe and the United States. But analysts have said a months-long chip shortage that hit global auto production has recently weighed on LG Chem’s profit.
“We are seeing gradual increases in our cylindrical battery shipments and we expect to see continuous growth as the global EV demand continues to grow,” Chief Financial Officer Cha Dong-seok said during an earnings briefing on Thursday.
Recently, some executives at chipmakers and car companies have turned cautiously optimistic over a potential easing of the supply crunch in the second half of the year.
Still others, such as Stellantis, said they expect the shortage to continue well into next year.
LG Chem, which is on track to hive off its battery business, said on an analyst call that it plans to secure EV battery production capacity of 430 gigawatt hours in 2025 that could power about 11.6 million EVs. It had earlier forecast capacity of 155 GW hours for end 2021.
Earlier on Thursday, LG Chem said it would set up a $1.1 billion joint venture with Hyundai Motor Group to build a battery cell plant in Indonesia.
The company, which gets nearly 60% of its operating profit from its chemicals business, said operating profit jumped to 2.2 trillion won ($1.92 billion) for the April-June period.
The latest quarterly profit included a settlement payment from rival SK Innovation Co Ltd worth 1 trillion won ($872.5 million), and a previously announced 400 billion won cost to replace batteries for energy storage systems (ESS) after fire risks were found.
The quarterly profit beat an average broker forecast of 1.2 trillion won, compiled by Refinitiv SmartEstimate.
In April, SK Innovation said it would pay LG Chem nearly $2 billion to drop all litigation in a bitter trade secrets dispute that had threatened a plant in the U.S. state of Georgia which SK is building to supply Ford Motor Co and Volkswagen AG.
($1 = 1,146.7800 won)
(Reporting by Heekyong Yang and Joyce Lee; Editing by Christian Schmollinger, Sonali Paul and Anil D’Silva)