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View of LG Chem's Cheongju plant. (Photo=LG Chem) |
[Alpha Biz= Reporter Kim Jisun] Credit rating agency S&P Global announced that it has adjusted the credit rating outlook for LG Chem and LG Energy Solution from 'stable' to 'negative', while maintaining their long-term issuer credit ratings and bond ratings at BBB+.
S&P Global stated, "The outlook adjustment is influenced by the continued large-scale investments by LG Chem and LG Energy Solution amid slowing demand for electric vehicle batteries." Additionally, the downturn in the petrochemical sector due to increased capacity from China has also impacted LG Chem's credit rating. S&P Global noted, "The negative outlook reflects expectations that LG Chem's financial indicators could deteriorate further over the next one to two years."
Previously, LG Energy Solution had planned capital expenditures (CAPEX) of approximately KRW 10.3 trillion for this year, similar to last year's level, but recently announced adjustments to this plan in their latest earnings report. LG Chem has designated eco-friendly materials, battery materials, and new drug development as its three new growth drivers and committed to investing a total of KRW 10 trillion by next year.
S&P Global forecasts that LG Chem's adjusted debt will increase from KRW 9.6 trillion in 2022 to KRW 16 trillion last year and further to KRW 22 trillion this year. The ratio of adjusted debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) is also expected to rise from 1.5 times in 2022 to 2.6-2.8 times this year. For LG Energy Solution, the debt-to-EBITDA ratio is projected to increase from 1.5 times in 2023 to 2.5-2.6 times in 2024 and 2025.
Earlier this year, another global credit rating agency, Moody's, also downgraded LG Chem's credit rating outlook from 'stable' to 'negative'. The downgrade was attributed to the poor performance of the petrochemical sector and the debt burden arising from large-scale capital investments.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
