Business

LG Chem Q3 results miss estimates, hit by GM Bolt recall cost

2 minute read

The logo of LG Chem is seen at its office building in Seoul, South Korea, October 16, 2020. REUTERS/Kim Hong-Ji

Register now for FREE unlimited access to Reuters.com

SEOUL, Oct 25 (Reuters) - South Korea's LG Chem Ltd (051910.KS) posted a 20% fall in quarterly profit on Monday, hurt by a one-off expense associated with the recall of General Motors' (GM.N) Bolt electric vehicles.

It reported an operating profit of 727 billion won ($617.55 million) for the July-September period, versus 904 billion won a year earlier and an average analyst forecast of 893 billion won compiled by Refinitiv SmartEstimate.

Earlier this month, LG Chem, which owns electric battery maker LG Energy Solution (LGES), said it would take a charge of 620 billion won in its third quarter results in connection with the GM Bolt recall due to the risk of fire caused by rare battery defects.

Register now for FREE unlimited access to Reuters.com

Revenue rose 41% to 10.6 trillion won, LG Chem said in a regulatory filing.

LG and GM settled a $2 billion cost deal on the Bolt recall earlier this month, paving the way for LG's battery unit to resume work on its suspended initial public offering.

"We expect that it is less likely that the company would face repetitive large-scale recalls related to battery safety issues in the future," LGES Vice President Chang Seung-se said in a call with analysts, citing the company's improved process to detect defective batteries.

LGES is hoping to a ride a boom in soaring battery demand, as global automakers are investing billions of dollars to accelerate a transition to low-emission mobility and prepare for a progressive phase-out of internal combustion engines.

The company, which also supplies Tesla Inc (TSLA.O) and Hyundai Motor Co (005380.KS), struck a deal last week with Stellantis NV (STLA.MI) to jointly produce EV batteries. read more

Before the third -quarter earnings results announcement, LGES named LG Corp (003550.KS) Vice Chairman Kwon Young Soo as its new chief executive officer. read more

Asked about LG Chem's plans to develop cheaper lithium-iron-phosphate (LFP)batteries for electric vehicles, the company said it plans to supply LFP batteries for energy storage systems (ESS) first.

Tesla said it plans to adopt LFP batteries in its fleet of standard-range vehicles globally.

LGES has been focusing on developing nickel-cobalt-manganese (NCM) batteries, which are more expensive but offer longer range.

Japan's Panasonic said on Monday it had noplans to make LFP batteries for electric vehicles.

Shares of LG Chem closed up 0.4%, versus the KOSPI's (.KS11) 0.5% rise.

($1 = 1,177.2300 won)

Register now for FREE unlimited access to Reuters.com
Reporting by Heekyong Yang and Joyce Lee; Editing by Miyoung Kim, Sam Holmes and Emelia Sithole-Matarise

Our Standards: The Thomson Reuters Trust Principles.

More from Reuters