 |
Photo = Yonhap news |
[Alpha Biz= Paul Lee] Korea Ratings Corporation (Korea Ratings) announced on June 20 that it has revised the outlook on LG Chem Ltd.'s unsecured bond credit rating from Stable to Negative, while maintaining the current rating of AA+.
The revision reflects deteriorating business performance due to unfavorable market conditions, rising debt driven by large-scale capital expenditures, and expectations of continued weak earnings and high leverage over the near to mid-term.
In its report, Korea Ratings stated:
“Sluggish economic recovery in China and growing global uncertainty amid U.S. tariffs are delaying demand recovery, leading to continued operating losses in LG Chem’s petrochemical division.”
The agency further noted that LG Chem has significantly increased capital expenditures (CAPEX) since 2022, citing expansion of its global energy solutions plants in the U.S., Canada, and Indonesia, as well as investments in advanced materials and maintenance spending in the petrochemical sector.
“While annual CAPEX was previously around KRW 6 trillion, it is expected to surge to KRW 14.8 trillion in 2024,” the agency said. “This has resulted in sustained investment spending far exceeding operating cash flow, causing a growing free cash flow (FCF) deficit.”
Korea Ratings also warned that the delayed expansion of ethylene production capacity in China is likely to accelerate again after 2025, and increased entry by global refiners into the chemical sector is expected to exacerbate supply-side pressures.
“As a result, underperformance in the petrochemical segment is likely to persist in the near to mid-term,” the agency concluded.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
