Good afternoon. We will now start LG Chem's 2023 first quarter earnings conference call. This is Hyun-seok Yun, head of IR at LG Chem. Thank you for taking an interest in LG Chem and joining this call despite your busy schedules. We will begin with the brief introduction of 2023 Q1 earnings performance, followed by the CFO presentation highlighting the company's earnings results, then a Q&A session. The presentations will be interpreted simultaneously while the Q&A will be interpreted consecutively. The material presented during this conference call can be viewed by those with web access. It is also available for download from our corporate website. Let's begin today's call with the introduction of the management team. We have CFO Dong-seok Cha, Myoung-s eok Lee from Business Planning, Ki-d ae Byun from Petrochemicals, Young-s eok Lee from Advanced Materials, and Soo-hee Yoon from Life Sciences.
Let's begin with the business performance. On page three, consolidated Q1 sales and P&L. Q1 sales grew by 25% year-over-year and 5% quarter-over-quarter to KRW 14,486 billion, backed by the growth in Advanced Materials and Energy Solution. Operating profit was KRW 791 billion, and OP margin was 5.5%. Next, page four is our consolidated financial status. As of the end of the first quarter, 2023, assets were around KRW 71 trillion, liabilities were around KRW 32,500 billion, and capital was around KRW 38,400 billion. Net asset value per share was KRW 405,000, increased compared to the end of 2022. Balance ratio was 84.6%.
As a result of the preemptive funding of KRW 1,400 billion in January to prepare against macro uncertainties, total liability to equity ratio increased compared to the end of 2022. Next, earnings by business division. Page five, petrochemical division. 2023 Q1 sales was KRW 4,579 billion. Operating loss continued at KRW 51 billion, however, the extent of the loss was reduced. While the Q1 utilization increased since last year's Q4 turnaround, weakness in the core products continued due to the sluggish demand in home electronics and construction amidst the sluggish market condition, and there was also the impact of falling exchange rate. Robust demand continued for high value-added premium products such as POE, SAP, and CNT. As of 2023, petrochem business realigned its organization structure.
Sustainability business unit focusing on eco-friendly products and next solution business unit focusing on high value-added products were newly installed. Past earnings have been retroactively applied to the new business units. Advanced Materials. In Q1, Advanced Materials sales was KRW 2,561 billion, a 36% increase quarter-over-quarter, and operating profit was KRW 230 billion. Despite the continued sluggish conditions in the downstream market for IT and semiconductor materials, demand recovered quarter-over-quarter for the cathode business to realize a significant increase in shipment and profitability. Life Sciences. In Q1, sales was KRW 278 billion and operating profit was KRW 16 billion. Sales of key products such as vaccine and growth hormone increased. Demand recovered in China's aesthetic business. From February, AVEO's earnings were consolidated following the confirmation of AVEO's acquisition. FarmHannong.
Q1 sales was KRW 265 billion and operating profit was KRW 34 billion. With greater sales of crop protection products at home and abroad, sales increased year-over-year. Lastly, Energy Solution. Yesterday, on April 26th, Energy Solution presented their performance in detail during its earnings call. However, we will briefly present their performance. In Q1, Energy Solution sales was KRW 8,747 billion. Operating profit was KRW 633 billion, and OP margin was 7.2%. Led by the North American region, shipment increased, and with higher ASP, sales growth is continuing. Also, by reflecting the expected IRA tax credit amount to the Q1 earnings, profitability improved. On this note, we'll conclude the Q1 earnings and outlook presentation and invite CFO Dong-seok Cha to present the outlook for the company's earnings.
Good afternoon. I'm LG Chem CFO, Dong-seok Cha. Thank you for taking great interest and participating in the company's earnings release conference call. First, a recap on our first quarter performance. We realized the best ever quarterly sales from the growth in the Advanced Materials business with greater shipments of battery materials and the growth of our subsidiary, LG Energy Solution. In respect to profitability, with the absence of one-off factors as we had in the previous quarter, we saw that our bottom line improved from the sales growth of battery materials. In respect to future outlook, we expect a bumpy recovery as uncertain macro factors such as consumption, investment, exchange rate remain as global economic slowdown continues. Once again, we will anticipate recovery, but it will be bumpy. We forecast positive earnings for the petrochem business as we enter the peak season from the second quarter and demand recovers.
We forecast that Advanced Materials and Energy Solution will continue their robust growth. Despite the challenging environment, we are on track in expanding the company's top three new growth engines, and we are showing progress in many areas. First, in petrochemical business, we restructure the internal organization to focus on fostering sustainability materials. As such, we have, as of 2023 January, newly created and are operating the sustainability business unit and the next solution business unit responsible for high value added products. Through this, we plan to accelerate the transition to a new business structure and have a greater focus on fostering new growth drivers. In Advanced Materials, with the recent decline in metal prices, sales and profitability can be impacted in the short term. With the U.S. IRA coming into force from this year, we expect many opportunities in the mid to long term.
To respond to such regulation, we are working hard to secure the supply chain, including entering the upstream by constructing the precursor plant in Korea and actively reviewing various opportunities to expand local production capacity. Finally, in Life Sciences, with the earnings of AVEO, a U.S.-based cancer treatment pharmaceutical company that LG Chem has acquired, consolidated from the first quarter this year, we not only believe that Life Sciences sales to go beyond KRW 1 trillion for the first time this year, but also by leveraging the synergy effect with AVEO, we plan to accelerate the pace of new drug development by revamping the pipeline strategy, which will include new cancer treatment drug. Dear investors, by expanding the business of the top three new growth engines, even in this challenging environment, the company will continue to grow and improve its corporate value. I ask for your continued support. Thank you.
Next, we will start the Q&A session. To allow more people to ask questions, please limit your questions to two. Press star and one to ask your questions, and press star and two to cancel your request.
[Foreign language] The first question is from the line of Eun-jung Lee from Macquarie. Please go ahead.
[Foreign language]
Thank you for the opportunity to ask questions. There are two questions that I would like to ask you. The first question is related to an announcement that you made two weeks ago, which would be the overall investment that you are planning to make in the Saemangeum region with Huayou Cobalt. As a result of that overall investment, did you make that investment with the overall concept that you did believe that such an investment would not follow under the IRA's foreign entity of concern definition? In addition to that, do you have any plans to further and expand your capacity within the U.S.? The second question I would like to ask you is related to your petrochemical business.
With regards to that business, on the operating profit line level, when do you actually believe that there can be a turnaround of your business? For the overall market backdrop and outlook going forward, how do you see the market evolving?
[Foreign language]
Yes, maybe I can address your first question about the investment that we made in the Saemangeum or planning to make in the Saemangeum area with Huayou Cobalt. According to the overall intentions that we have behind making this investment, it would be that under the IRA, we do want to ensure that we are able to secure the critical minerals requirement that we need to be able to solve by having our overall capacity located within a FTA country in which the US has an FTA with.
That have been said, the other intention also would be to expand the overall operations that we have, starting from the overall nickel sourcing to actually producing the cathodes and also providing the smelting that is related and necessary for the processing of such situations. In terms of whether we believe that the JV would be out of the scopes of the foreign entities of concern according to the IRA, I do think that once the overall definition is more finalized and more determined in detail, that we can actually flexibly deal with the situation by adjusting the shareholding that we have within the JV to address the issue.
[Foreign language]
Maybe I can address the first question that you have asked with regards to the overall outlook that we have for the petrochemical business and also, the way that we see our profitability moving going forward. For the market as a whole, it is true that from the second half of this year to the first half of this year, we actually believe that this is the bottom of the overall market. Of course, from product to product, there may be differences within the timing in itself. From the demand side, we do actually believe that there will be a moderate recovery within the overall market that we see.
It is true that the oil prices and crude prices remain high, and in actuality, in addition to that there is an overplus supply situation that persists within the market. As a result of that, we don't believe that the overall improvements that we are experiencing will be of a significant nature, but it will be more moderate in terms of the trends. However, in terms of the timing for the turnaround and full force, I do think it's a bit early to be speaking about when we believe that that will happen. Towards the second half of this year, we actually do see less new capacity being supplied into the market from the region.
If we do see a overall improvement in demand from China, we actually believe that there can be an improvement that will take place in our profitability.
The next question is from the line of Woo-hyung Cho from HSBC. Please go ahead.
[Foreign language]
Thank you for the opportunity to ask questions. I would like to ask one question each from related to your petrochemical business and also your Advanced Materials business. First, starting with the petrochemical business, this year, if you look at the overall, you know, changes that have been taking place, you did revamp some of your business units. As a result of that, for more environmentally friendly plastics, what is the changes, if you could provide an overview that is taking place there? What would be your business strategy in this area going forward?
The second question that I would like to ask you is about your Advanced Materials business. At the end of the previous month, of course, more details about the detailed regulations surrounding the IRA were announced. As a result of those announcements, about your investment in the cathodes area and also in the separator area, are there any changes in plans that you would have as a result of those announcements?
[Foreign language]
Yes. Maybe I can address your question about the overall petrochemical business. Of course, for sustainability, this is an area that we have identified as a new growth driver for the future.
As a result of that, amid a very challenging business environment, with regards for our new and more environmentally friendly overall products, for example, with related to the bio area and also for the recycled plastic area, the initiatives that we have ongoing are going to be pursued at the same pace that we had initially planned. As a result of that, on the PBAT side, for biodegradable plastic, this is something in which we are planning to go into mass production in the first quarter of next year. On the PLA side, we continue to engage in various strategic discussions in terms of cooperation with various partners.
On the recyclable plastic side, including mechanical recycling, we are also looking into various options available, including supercritical water for hydrothermal plastic recycling. As a result of that, with regards to environmentally friendly initiatives, both on the material side and also on the technology side, continuous efforts will continue to be made. Added to that, with regards to our customer base and also the uses that we see for these various products, we will continue to discover more premium areas that we would be able to enter into. As a result of that, we are in continuous discussions with various brand owners, and with that, we do hope that our LETZero brand will be able to make more traction going forward.
[Foreign language]
Maybe I can address your second question about Advanced Materials.
If you look at the IRA guidance that was announced at the end of March, in actuality there was a lot of detail that was provided about the overall clean vehicle credits and the subsidies that would be provided for EVs. On the advanced manufacturing product production credit side, in actuality nothing really new has been announced. As a result of that, under the general assumption that the details that were provided in the white paper for the IRA are not modified, we are going ahead with our overall investment strategy as we had initially planned.
As a result of that, on the cathode side, separate from, you know, the possibility of various impacts under the IRA, this is something that we are pursuing as, you know, a situation in which we want to localize our overall production in North America because we have received various requests from our customers. As a result of that, there will not be any change there. In addition to that, if there are benefits that we can reap according to the AMPC and also with regards to various discussions that we have with our customers about our overall ASP levels, and of course that will be something that we will pursue.
In addition to that, on the separator side, this also is something that is in discussion with our customers about the localization of separator capacity. Right now we're at the level in which we're thinking about what the appropriate size would be.
[Foreign language] The next question is from the line of Dong-j in Kang from Hyundai Motor Securities. Please go ahead.
[Foreign language]
Yes. Thank you for the opportunity to ask questions. There are two questions that I would like to ask you. First is that if you look at battery producers globally, I do think that there's a lot of development taking place on the LFP chemistry side. As a result of that, I do think that demand for LFP cathodes is something that will increase going forward. How is the company going to address this overall situation?
Does it have any plans to deal with some of the demand that may be coming from North America or to supply into that market? The second question is a question that I would like to ask about your acquisition for AVEO. AVEO is something that has been consolidated in your performance from the first quarter. If you could provide an update about how, you know, things are going after the acquisition and also in terms of your overall, you know, competitive edge that you believe you will be able to enjoy in the cancer treatment area for new drugs, that is something that we would appreciate.
LFP 관련 답변드리도록 하겠습니다. EV의 원가 경쟁력 강화를 위해 OEM 배터리 업체의 LFP 채용이 늘어나고 있으며 IRA 등으로 LFP 공급처가 제한적인 상황에서 고객사의 LFP 공급 요청이 계속되고 있습니다. 포스트 혁신, 저가 솔루션에 대한 제품 포트폴리오 구축 확장 측면에서 기존에 계획된 고전압 미드니켈, 망간 리치 등의 제품 개발과 동시에 LFP 양재 사업화를 검토 중에 있으며, 사업의 핵심 성공 요인인 원재료 밸류체인의 체계 구축을 위한 외부 업체와의 협력도 협의 중에 있습니다.
생명과학 사업본부 관련해서 말씀드리겠습니다.
Maybe I can do some of the translation for the first question first before we go into the answer for the second question. For LFP, it is something that is being, you know, more widespread in terms of securing the cost competitiveness for EVs. As a result of that, on the OEM side and also on the battery producer side, we do see that there is more of an initiative on the LFP chemistry side that is taking place. In addition to that, under the IRA framework, there will be limited supply available of LFPs that would qualify for IRA credit.
As a result of that, we do see a lot of customers asking us, if, you know, that we would be able to supply LFP to them, as a result of that. LFP is an area that we are continuously reviewing in terms of how we want to play LFP going forward. In terms of the cost innovation that is required and also, expanding our portfolio into the low-end solution area, we do think that it would be an attractive option, together with, you know, other types of technology that we would be able to produce, for example, high voltage nickel or other technology.
In addition to that, on the raw material side, we continue to discuss with various partners about how we want to build out the value chain that would be able to support this business.
생명과학 사업본부 질문 답변드리겠습니다. 우선 AVEO 인수 관련해서는 저희 1월 20일 최종 인수 완료 이후 PMI는 순조롭게 진행되고 있습니다. 글로벌 항암 사업주로 도약하기 위한 비전과 성장 지향점을 정리하였고, 다양한 integration 프로그램들을 통해서 AVEO 전 임직원과 소통하고 있습니다. 그래서 AVEO사 핵심 인재들이 조기에 사업 업무의
Also provider. We are defining what we want to have for in terms of our vision and also our growth targets and growth goals for the future. In addition to that, through various integration programs that we are conducting, we continue to communicate closely with the existing employees and also management team of AVEO.
For the key personnel at AVEO, of course, we are trying to ensure that they can get back to work and concentrate as soon as possible. If you look at the overall performance that we have seen for FOTIVDA, which would be the renal cancer treatment, on a year-over-year basis, we've actually seen growth of more than 60%. Under the consolidated vision for the future and to rapidly grow our position as a global cancer treatment provider, we are in the process of trying to set the details for our value creation plan going forward. We are also trying to accelerate the overall development pipeline that we would have for the future.
In addition to that, through open innovation, we do also believe that there will be other growth opportunities that we will be able to actively address. To talk about what we believe our competitiveness in this area would actually be, of course, you know, in the new drug development area, we do have a full value chain of capabilities that we have been able to secure. Based upon that, we are planning, and we do have experience, releasing various medications of various modalities in the U.S., Europe, Japan, and also China. Based upon that track record, we do think that we also will be able to continue to have, you know, a very strong performance in terms of development and also commercialization.
Since we were merged into LG Chem in 2017, we have been focusing on new drug development in the area of cancer treatments and also metabolism disease treatment. We do have a very clear strategic direction that we want to become a global pharmaceutical player within this market. As a result of that, we have been making very bold investment into the key areas. Based upon the capabilities of providing drugs that support various modalities, I do believe that we will continue to delve into our plans and our efforts to become a global cancer treatment player within the market. Thank you.
네, 다음 질문 받도록 하겠습니다. 다음으로 질문해 주실 분은 Shinhan Securities의 Jin-myung Lee 님입니다. 질문 부탁드립니다.
The next question is from the line of Jin-myung Lee from Shinhan Securities. Please go ahead.
네, 안녕하세요. 신한투자증권 이진명 연구원입니다. 먼저 질문 기회 주셔서 감사하고요. 저도 첨단소재 관련해서 두 가지 질문드리고 싶은데 일단 첫 번째로 저희가 뭐 지금까지 계속해서 이런 추가적인 M&A나 제휴 같은 다양한 신사업들을 지금 추진하고 계신데 앞으로 추가적으로 좀 나올 만한 부분들이 있는지, 그렇다면 어느 사업부 쪽에서 나올지 해서 말씀 부탁드리고 그리고 저희가 또한 이제 비핵심 자산 매각 관련해서 현재 진행하고 있는 부분이 있으신지 말씀해 주시면 감사하겠습니다. 그리고 두 번째 질문은 저희가 이제 현재 LG 엔솔 외에 다른 신규 고객사 관련해서 좀 외판 계약이 좀 가시화되는 시점이 언제쯤 저희가 예상하면 될지 관련해서 말씀해 주시면 감사하겠습니다.
Yes, thank you for the opportunity to ask questions. There are two questions that I would like to ask you related to your Advanced Materials business. First, would be that if you look at the progress to date, it does seem to be that you have been very active in new business acquisition, whether it be through M&As or also various partnerships that you have within the Advanced Materials landscape. If you would have, you know, future interest going forward, what areas that would represent? Through what division or business unit do you actually believe those type of initiatives could be pursued? In addition to that, on the non-core asset sale area, if there's anything that is ongoing, and anything that you can discuss, that is also something that would be appreciated.
The second question that I would like to ask you is about, also your customer base. For new non-captive customers, you know, setting aside LG Energy Solution, when do you think some of the orders from such customers would be able to materialize in more full force? When do you believe the timing of that would be?
[Foreign language]
Yeah. Yes. Maybe I can address your question from a broader, you know, company perspective in terms of our intentions going forward and what we're trying to do. As we have mentioned many times before in terms of the new growth drivers for the future that we want to foster in more full force, we have identified three main areas.
As a result of that, whether it be from a technology perspective or from building out the supply chain related to those operations, we did feel that, just depending upon our own internal capabilities in terms of pursuing that business to the level of quality that we would like, and also at the speed we would like, is a bit, you know, it's not sufficient to do so. As a result of that, to be able to catch up at the pace that we want to build, these businesses out, that's why we have been pursuing various M&As and also JVs, with strategic partners, to be able to do so. As a result of that, we continue to build out these areas and foster them at a faster pace.
Going forward, I do believe that this overall stance is something that we will maintain. However, in terms of the areas of interest, again, it would be the three main areas that we have identified as new growth drivers. In particular, on the petrochemical side, as we have mentioned before, it would be sustainability related areas, in the areas of bio, also more environmentally friendly materials and also recyclable plastics. On the battery materials side, it would be supply chain related, you know, or SCM related initiatives. Maybe it could be, you know, battery components in which we are not present right now, in which we would be able to invest into.
On the Life Sciences side, it would be, you know, areas in which would enable us to build out the overall cancer treatment pipeline that we have for the future. Those are the areas in which the resources available will be used. I do think that the latter part of your question in terms of, you know, the non-core asset disposal sales or such, is probably related to how we are going to fund this investment for the future in terms of resources. Maybe it's stemming from some concerns on that area. Of course, I think that that is why you have asked about whether we have any intentions to sell or maybe withdraw from some of the businesses in which we see more moderate growth taking place.
You know, separate from how we're going to fund the investment for the future, I think that in terms of managing our overall business portfolio and also looking at our non-core assets or in terms of the businesses that are growing at a slower pace, selling such businesses or maybe withdrawing from that is a normal part of our operations, you know? It is something that we are continuously engaging upon and would be continuously monitoring.
[Foreign language]
Maybe I can address your second question about our non-captive business in terms of more clear orders and more visibility on that side. Right now we are engaging with various global customers and talking about supply terms and conditions for our cathodes with non-captive customers.
We do think that we would have some more realization take place this year or maybe at the beginning of next year. That have been said, in terms of finalizing the actual volume of which would be supplied, this is something that is related to, you know, the capacity expansion plans that we have. As a result of that, for the actual signing of such agreement, there could be some flexibility as a result of the coordination that is required.
[Foreign language] The next question is from the line of Oscar Yee from Citi. Please go ahead. [Foreign language] The next question is from the line of Nikhil Bhandari from Goldman Sachs. Please go ahead.
Yes. Hi, thank you for the opportunity. I've two questions, both on the cathode business. Firstly, can you talk about where is LG Chem's own technological capability to make their own precursors in future? Or how long will it take to build the own capability in making precursors without any, let's say, partnership with the other companies like the one you have done from China? In the particular JV plan you announced with Huayou Cobalt, it suggests that it's gonna complete by 2028. I'm just wondering, why is the construction time or the ramp up time so long for that particular plan? The second question is on your cathode margins.
It was commented in the opening remarks that the revenue margin can come under pressure from the metal price correction. Can you talk about given cathode prices have already materially started to correct, how low can margins go in the upcoming couple of quarters? Last quarter, last year in particular for 2Q and 3Q, your margin did very well when metal prices were going up. Should we expect a material underperformance of the margins in the next two quarters? Or is there any reason why margins will still be stable? Thank you.
[Foreign language]
[Foreign language]
Maybe I can take your questions one by one in terms of addressing, you know, the points that you have mentioned. First, if you look at the overall investment that we are making in the Saemangeum area, in actuality, the underlying technology that is going into building out that capacity is our technology. Based upon the mother factory that we have built in in extent for precursors, we have been able to improve the overall productivity of our capacity. We do think that we have been able to secure a stable technology base that would enable us to enjoy this higher level of productivity going forward. As a result of that, for the Saemangeum investment, we will be applying a new process technology to this capacity.
As a result of that, we do think that the overall Saemangeum site in itself will be of a higher quality and also higher productivity level as a result of that in terms of our overall productions. The reason why the timeline spans out to 2028 in terms of our productions is that internally, based upon the basic design that we have for the capacity and also the fact that we're applying new technology to this factory in terms of the processing technology, we did want to make sure that we had, you know, a certain amount of room to be able to deal with it in a moderate pace.
However, of course, internally, we are going to try to move things as fast as possible so that we can reach mass production as soon as possible.
[Foreign language]
To address your second question about our margins and the profile that we would have, if you look at the overall margin profile that we have for our cathode business, under the assumption that metal prices remain stable, we do think that this is a business that would represent a high single digit type of margins. However, if you look at the recent situation, lithium prices have been dramatically dropping. As a result of that, we will have some burden from inventory taking place, and we do think that that may have an impact on our overall profitability. We want to minimize our inventory on this side as much as possible.
Last year, as you had mentioned, lithium prices had surged, and as a result of that, we were able to secure early on a lot of inventory in this area. With that, we were able to maximize the benefit of the lagging effect, to, you know, a maximum level. However, in a reverse situation where lithium prices are dropping, we will try to minimize the impact as much as possible by adjusting our inventory levels accordingly.
[Foreign language] The next question is from the line of Parsley Ong from JP Morgan. Please go ahead.
Hi, thank you for the chance to ask questions. This is Parsley. I have two questions. The first question is on the IRA and your Huayou Cobalt joint venture. I think earlier you mentioned that if the U.S. adopts a stricter definition of the foreign entity of concern, whereby all Chinese companies are defined as a foreign entity of concern, you might adjust your ownership stake in the JVs where necessary. Does this mean that LG Chem might consider taking over Huayou Cobalt stake? If so, what would be the reason for doing a joint venture with Huayou on the precursor instead of just doing it 100% LG Chem right now? If you have to adjust your ownership stake, what would be the potential acquisition cost?
Will there be some kind of licensing fee agreement, something like that? How would this affect LG Chem? On a net basis, would you say if China, if the whole of China, is a foreign entity of concern, on a net basis, would this be a good thing or a bad thing for LG Chem, in your opinion? The second question is on AVEO. Could you just clarify with us the earnings contribution to first quarter and your outlook over the next few years? How much do you plan to spend on biotech CapEx or including potential M&A over the next few years? Thank you.
[Foreign language]
[Foreign language]
Maybe I can address your first question about the FEOC's definition and how we view that overall situation. Of course, none of the details with regards to the actual definition of the foreign entity of concern have been finalized yet. However, we are working under the assumption as of the current time that the definition would be similar to the definition that we see within the CHIPS Act that apply to the semiconductor sector, i.e., that it would be, you know, the overall watermark would be an ownership of 25% or more. That is the overall level that we're expecting to apply for the IRA.
The reason why we have pursued the JV with Huayou Cobalt, even though we did know that there was an FEOC related risk, was because of the benefit that Huayou can provide in terms of sourcing the raw material that is required for the production. In the area of the nickel intermediary goods that are needed for sourcing to actually create and produce the precursors, Huayou does have a very strong advantage, and we did believe that this was something that we would be able to enjoy. That was the motivation behind the JV in itself.
In the extreme situation in which, you know, all Chinese interest or any company that has any form of Chinese interest, would be defined as an FEOC, then we did take into consideration the possibility of acquiring the full stake of ownership for the company. However, such a transaction would only go ahead under the assumption that in advance of such deal that we would have a supply agreement in place to secure the raw materials that are necessary. That have been said, to answer the last part of your question about, you know, on a net basis how we see the FEOC as an implication on a larger scope. We do think that at the end of the day, it does have...
If China is included as an FEOC, we do believe that that has the benefit of lowering the level of competition, or the degree of competition that we would see within the market, we do think that that is beneficial for our business.
[Foreign language]
To address your second question about AVEO. In the first quarter, because of the overall, if we look at the first quarter alone on an operating profit basis, there was a moderate or a very small loss that we generated from the AVEO business in terms of its profitability. The reason for that is that for the FOTIVDA product in itself, it's still in the very early stages.
Added to that, there were also one-off costs that we recognized in the fourth quarter, that led to this overall loss. However, if we look at it on a full year basis, we do think that this is something that will turn into the black for the full year. Going into next year, we do think that there will be a profitability improvement that we will be able to see, and profitability contribution that we will be able to enjoy thereafter. In terms of the CapEx requirements for this business, as we have mentioned since the acquisition, we're right now in the process of going through and establishing the value creation plan that we want to have for the operations.
Since this is not available yet, we wouldn't be able to talk about what our expectations would be for the future as of the current time. We will share that once that is available.
[Foreign language]
This maybe we can wrap up the conference call on the first quarter 2023 earnings for LG Chem. For those of you who were not provided with an opportunity to ask questions or for any of you that have follow-up questions, please do not hesitate to contact our IR team. Thank you for your time today.