Good afternoon. We will now start LG Chem's 2022 F irst Quarter Earnings Conference Call. This is Hyun-Seok Yoon, 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 a brief introduction of 2022 Q1 earnings performance and outlook, followed by the CFO presentation highlighting the company's earnings results, and 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, Myeong-seok Lee from Business Planning, Ki Dae-byeon from Petrochemicals, Young-suk Lee from Advanced Materials, and Heuisul Park from Life Sciences.
We will first address the business performance. On page three, we have consolidated Q1 P&L. Q1 sales grew by 20% YOY and 6% QOQ to KRW 11.608 trillion to record the highest ever quarterly sales. Operating profit was KRW 1.024 trillion, and OP margin was 9%. Next page is a summary of our earnings performance, excluding LG Energy Solution. Sales was KRW 7.891 trillion, an increase of 35% YOY and 15% QOQ. Advanced materials grew by 33% QOQ and other businesses, including petrochemical, all grew at a similar level. Operating profit was KRW 818 billion, and OP margin was 10.4%. Next, on page five, we have the consolidated financial performance.
As of the end of the first quarter 2022, assets were around KRW 64.4 trillion. Cash was around KRW 14.1 trillion. Liabilities were around KRW 29 billion. Bonds were around KRW 35.5 trillion. Net asset value per share was KRW 387,000. After the LG Energy Solutions IPO in January, cash and capital accounts increased significantly. Consequently, financial ratio greatly improved with bond ratio at 81.5% and total liabilities to equity ratio at 1.6%. Next, earnings and outlook by division. On page six, you'll see Petrochemical division's earnings. 2022 Q1 sales was KRW 5.964 trillion. Operating profit was KRW 635 billion, and operating margin was 10.6%.
Profitability fell slightly due to the deterioration of the external business environment, such as high oil prices from Russia-Ukraine crisis, lockdowns in China from the resurgence of COVID, supply increase from global new capacity backed by LG Chem's differentiated product portfolio, we were able to record more than 10% in profitability by recording high profits led by POE and SAP. In Q2, we forecast that the challenging environment to continue due to the risk of demand recovery being deferred from the global business uncertainties such as rising raw material prices and due to continued high oil prices, China, and et cetera . In spite of this, LG Chem will defend its possibility with efforts to raise the HP focused on high value-added premium products. Next, Advanced Materials in Q1. Advanced Materials sales was KRW 1.568 trillion.
Operating profit was KRW 154 billion, and operating margin was 9.8%. Despite the automotive semiconductor and metal supply shortage that has persisted from last year, LG Chem achieved the division's highest ever sales centered around battery material business and profitability also significantly improved from the increase in the shipments of high value-add premium products, including high nickel cathode, OLED, and semiconductor materials. In Q2, while we are forecasting a challenging environment with the continued risk in the industry supply chain through the upgrade of the product portfolio towards premium products and customized portfolio diversification, we expect growth to continue led by the battery material business. Next, Life Sciences. In Q1, sales was KRW 217 billion, and operating profit was KRW 32 billion. OP margin was 14.8%.
With the greater shipments of high-margin core products including growth hormone, diabetes treatment, sales grew and profitability improved. In Q2, we expect robust sales to continue with the market share growth of core products and R&D investment is expected to expand, led by clinical trials in the U.S. as a result of progress in new drug development projects. Next, FarmHannong. Q1 sales was KRW 261 billion, and operating profit was KRW 41 billion. With the seasonality in the first half, the business turned a profit and both sales and profitability improved YOY with greater sales of crop protection products, including greater exports of Terrad'or. With the global inflation in full swing. We expect to bear the burden of rising raw material prices in the future.
However, we forecast that for the full year, performance is to improve by reinforcing our portfolio center around products with the greater customers, including overseas business expansion. Our crop protection products. Lastly, Energy Solution. This morning, Energy Solution presented their performance in detail during its earnings release conference call. However, we'd like to briefly present their earnings here. In Q1, sales was KRW 4.342 trillion. Operating profit was KRW 259 billion, and OP margin was 6%. Despite the sales increase in EV cylindrical batteries, sales decreased slightly due to the shipment reduction from automotive, semiconductor, and supply chain issue. However, profitability improved due to the expansion of metal price pass-through contracts in response to raw material price surge, and productivity gains also contributed.
In Q2, while certain macro issues will continue, sales is to expand, centered around balanced demand of all products and strategic customers. On this note, we will conclude the Q1 earnings presentation and invite CFO Dong-Seok Cha to present the highlights of the company's earnings performance.
Good afternoon. I'm Dong-Seok Cha, CFO of LG Chem. I'd like to begin by thanking everyone who are joining this call despite your busy schedule. Thank you very much for your interest. First, looking back on the first quarter, we began the year facing a deeply difficult business environment. Oil prices surged to over $100 due to the Russia-Ukraine conflict, and prices for most raw materials, including lithium and nickel, also significantly rose. Consequently, other expenses likewise increased significantly, such as transportation and energy cost.
In the petrochemical industry, amidst a full-fledged supply of new capacity additions in Northeast Asia, demand weakened and spread tightened for core products due to China's strong lockdown measures brought on by COVID. Despite such a challenging business environment, in the first quarter, we posted robust earnings. On a consolidated basis, we were able to generate the highest ever quarterly earnings and operating profit of around KRW 1 trillion. Excluding Energy Solution, there was high sales growth along with a double-digit OP margin. The drivers of such performance are, first, portfolio realignment focused on high value-added products that the company has been pursuing over time, along with increased shipments of premium product groups such as Petrochem's POE and SAP, as well as NCMA high energy density cathode, and OLED materials from efforts to strengthen product competitiveness.
Also, to respond to global inflation, including surging raw material prices and rising transportation costs, internally, we are more focused than ever on cost-cutting efforts while expanding the price pass-through contracts of raw material costs to defend our profitability in the challenging business environment. Dear investors, we forecast that the uncertainties in the business environment at home and abroad we face in Q1 will continue into the second quarter. Amid the spread of global inflation, including rising raw material prices with automotive, semiconductor shortage, and continued lockdowns in China affecting us, we believe that demand remains still unclear. To overcome such difficult circumstances, LG Chem plans to focus on two areas. First, on one hand, we'll continue to improve product and quality competitiveness centered around differentiated premium products.
On the other hand, in line with the global inflation trend, we plan to have our ASPs more actively reflect rising costs in raw material prices and transportation costs. Moreover, LG Chem declare that this year is the year of customers. Thus, we are channeling all the company's competencies into improving customer satisfaction from product to after-sale support and endeavoring to be more recognized by customers by raising the value of our core products. Second, we plan to accelerate the development of the top three new growth drivers that we have been focusing on. In sustainability business to build the recycled ecosystem, we are cooperating with houses, CJ Logistics, Shinsegae, and greatly increased bioproduct shipment from increase in demand.
In battery material business, we are already generating some visible results in our earnings performance. Sales in Q1 grew 90% on quarter, and we are planning for continued growth going forward. Along with full-fledged increase in the portion of the high energy density cathode such as NCMA, sales to third party is growing in a meaningful way, and we expect this to play a big role in advanced material sales and profitability growth. We also made progress in new drugs development. Already in the United States, NASH treatment, which is in clinical trial phase , and another NASH treatment with a different active mechanism, has been approved for clinical trial phase I. This two-way track improves the possibility of a successful new drug development and increased synergy.
Backed by the high growth of new growth engines, LG Chem expects sales to grow on quarter in Q2, and for the full year surpass the targets that we have announced at the beginning of this year. On top of this, in the face of an uncertain environment to improve operational efficiency by efforts such as cost saving, strengthening our product competitiveness, and improvement in customer satisfaction, we will endeavor to continue generating robust profits. We ask for your continued support going forward.
Thank you. Next, we will move to the Q&A session. To give more people the opportunity to ask questions, we will limit the number of questions to two per person. To ask your questions, press star and one. If you want to cancel your question, press star and two. The first question is from the line of Anna Park from Macquarie. Please go ahead.
Yes, thank you for the opportunity to ask questions. This is Anna Park. I would like to ask you two questions. First is about your chemical business outlook for the petchem business. Even amidst a very high oil price environment, you have been able to achieve a very high level of profitability. The question that I would like to ask you is that for the business going forward, do you believe that you would be able to maintain a double-digit operating margin in the future? The second question that I would like to ask you is about your battery materials business. In the current environment, we do see lithium prices surging, and as a result of that, I do believe that there's a growing interest for high-nickel batteries.
If the nickel content in the batteries continues to increase, then what does that mean for your cathodes business, in terms of the overall yield, in terms of the product prices, and in terms of the material sourcing? What would be the overall impact on your business operations? In addition to that, in terms of diversifying your customer base outside of your, captive customer, what progress has been made on that front?
Yes. Maybe I can address your first question about the petrochemical industry outlook. As you have just mentioned, if we look at the current market backdrop in terms of the market environment, both on the supply side and on the demand side, the overall backdrop is not very favorable.
In terms of the overall supply, as you are aware, in terms of the overall demand, as you are aware, since the Chinese holiday season, there has been a delayed recovery. In addition to that, China has also gone into a lockdown, whereas on the supply side, we do see new capacity additions coming from China. In addition to that, if we look at material costs, due to the Russia-Ukraine overall situation, oil prices have been surging, and as a result of that has not been favorable for our overall business. For the business environment, unfortunately, we do think that the second quarter will be a continuation of the first quarter in terms of the overall backdrop.
If we look at the second half of the year, well, we do think that in terms of the capacity and in terms of supply, that will continue, and at the same time that the high oil price environment will continue to put upward pressure on costs. However, on the demand side, we do think that there is a possibility to have some expectations. For example, once some of the lockdown in China is relieved, then we do think that there is a possibility of there to be some economic boosting measures. In addition to that, if the automobile semiconductor issues are also addressed, then we do think that there can be some more higher expectations that we would see in the second half.
One of the things that we do think is fortunate for our business is that in terms of the overall business portfolio and product portfolio, we do have a very well-diversified portfolio. In addition to that, for the products that we hold, a lot of the products are focused on the high value-added segment. As a result of that, in terms of the impact on the negative side or the losses that we are actually experiencing, that is less than what we would see on a relative basis versus our peers. Going forward, if we look at it by business segment, for the NCC, PO, and generic products there, we do believe that that will continue to be very lackluster.
However, for the high value-added PVC and ABS areas, we do think that the market there will continue to be healthy. In addition to that, for the more high-end products that we see, so for example, for solar panel purposes or for EVA, and also automobile semiconductor IPA products, we do think that that will continue to be very robust, which should help our overall profitability.
Maybe I can address your question about the overall battery materials business, for the nickel price and what that impact that has had on our overall operations and also our customer diversification efforts that we are making. As you have mentioned, the nickel prices have been on the rise.
However, basically, the overall structure that we have for our pricing plan is that, the metal index prices are reflected into our overall sales price and are transferred there. As a result of that, the rising nickel prices in themselves do not have an impact on our profitability. If we talk about the high nickel batteries, of course, these are a premium, high nickel battery materials. These are premium products, and therefore the profitability that we're able to enjoy on these, products would be, larger than that of, generic products. As a result of that, as the portion of these type of products, continue to increase, within our overall, business portfolio, that will help contribute, to the bottom line of the business.
In terms of new customer acquisitions outside of LGES, we have been working and we have been able to acquire some small to medium-sized Chinese companies. In addition to that, we continue to pursue spec-ins of NCM batteries and high nickel batteries with battery producers who supply to global OEMs. We do think the results of those efforts will start to kick in from next year or the year after, during which we will be able to see higher growth.
The next question is from the line of Yu- Jin Chun from Hi Investment & Securities. Please go ahead.
Yes, thank you for the opportunity to ask questions. I am Chun Yujin. As you have mentioned, there has been a decrease in demand from China. Added to that, we also see naphtha prices continue to rise, which may lead to more lackluster performance going forward. As a result of that, what has been the overall utilization of your capacity, in light of this situation? Going into the second quarter, do you have any plans, to adjust the overall utilization of the capacity that you have? The second question that I would like to ask you is about your life sciences business. You did mention that you have NASH development projects that will be going into clinical trials. What plans do you have outstanding on that side? What development is taking place?
In addition to that, for the development that you have, what type of competitive edge do you think that you have versus your competition?
Yes. For the petrochemical business, maybe I can address your first question. For the company and the capacity that we have on a per month basis, we actually do look at the market environment and also the overall cost levels, to actually look at how we want to run our productions. As a result of that, we do have a flexible utilization rate, that we manage accordingly. If we look at our NCC capacity, because the ethylene spreads recently have been weak, as a result of that, our overall utilization has been adjusted downward by around 10%-20%.
In the second quarter, we do think that the market environment will continue as is, the first quarter, you know, on the back of the first quarter. As a result of that, we do think that for the NCC levels, it will be maintained at a similar level. In addition to that, on the downstream side, for the low profit or more commodity type PO products, we do want to adjust that also accordingly.
To address your second question, for NASH or non-alcoholic steatohepatitis, this is a metabolic disease that also results in obesity and chronic diseases. It is a serious illness that starts with fatty liver and may lead to other more serious illnesses such as steatohepatitis, liver cirrhosis, and ultimately liver cancer.
In addition, the mode of action is complex and includes fatty liver, also inflammation and liver fibrosis. Thus there is no approved treatment yet. If a new drug is launched, we believe it would have the potential to address a roughly KRW 20 trillion market in 2029. The Life Sciences division is researching and developing treatments from various approaches that would block a wide variety of mechanisms. For example, we have one project that aims to block the inflammation and has completed the phase I clinical trials in the U.S. and is expected to move on to phase II. In addition, we have another project that would limit fatty accumulation. This is a project that has received phase I approval from the FDA in March and will be starting soon.
In addition, we have a project related to liver fibrosis, that is in the research stage. As mentioned before, NASH can occur for many different reasons, and thus we expect that combination therapy to address these different aspects will be required. Therefore, we expect that the various projects that we have ongoing will be able to create a mutual beneficial synergy.
네, 감사합니다. 그럼 다음 질문 받도록 하겠습니다. 다음으로 질문해 주실 분은 Nomura Financial Investment의 박세영 님입니다. 질문 부탁드립니다.
The next question is from the line of Cindy Park from Nomura Financial Investment. Please go ahead.
두 가지 질문드리려고 하는데요. 첫 번째는 화학 사업 관련해서 중국 내에 있는 PVC하고 ABS 공장들이 최근 락다운으로 인해서 어떤 영향이 있는지 궁금하고요. 아까 이 두 제품은 실적이 양호하다고 말씀하셨는데, PVC, ABS 포함 또 다른 고부가 제품들 증설 계획이 어떻게 잡혀 계신지 궁금합니다. 두 번째는 주주환원 정책 관련해서 여쭙고 싶은데, LG 에너지 솔루션 지분 매각 이후 현금 유입도 됐고, 배당 성향을 30%로 발표를 하신 상황인데, 이 외에도 혹시 자사주 매입을 하신다든지 혹은 자사주 매입 후 cancellation 같은 다른 계획이 있으신지 궁금합니다.
Yes. Thank you for the opportunity to ask questions. There are two questions that I would like to ask you. One is about your petrochemical business. Recently, if you look at your PVC and ABS business in China, of course, I do believe that these operations would have some impact from the Chinese lockdown. What has that been? You have said that the PVC and ABS business, regardless of this, has shown strong performance. If you could elaborate a bit about that. Also, for example, the expansion plans that you would have for PVC, ABS and other high-end or premium products. The second question that I would like to ask you is about your shareholder return policy.
You have disposed of some stake in LG Energy Solution, and as a result of that, do have cash on hand. The company has announced that the dividend payout ratio intention was to have around 30% payout ratio. However, in addition to that, does the company have any plans to, for example, engage in treasury share purchases and maybe have a share buyback and cancellation type of scheme?
수기화학 관련해서 답변드리겠습니다. 현재 중국의 락다운이 심화가 되면 가전이나 자동차 등 수기화학의 주요 전방 산업이 위축이 될 것이고, 중국에 진출해 있는 당사 생산 법인의 가동이 제한될 우려가 있습니다. 따라서 중국에 많이 exposure가 되어 있는 ABS 사업이 많은 영향을 받을 것이고, 반면에 PVC는 일부 영향이 있겠지만 경기 부양이나 인프라 측면에서의 긍정적인 요인도 있기 때문에 그 부분은 좀 지켜봐야 될 것으로 생각이 되고 있습니다. ABS와 PVC 사업의 중장기 전망을 말씀드리면, ABS 같은 경우는 향후 2년 동안 상당한 규모의 중국의 증설이 예상되고 있습니다. 따라서 이로 인해서 하반기부터는 좀 공급 압박이 있을 것이고, 이에 따른 시황 하락 트렌드가 있을 것으로 보고 있습니다.
하지만 당사는 글로벌 일등 ABS 플레이어로서 내열 제품이나 투명 제품과 같은 고부가 ABS 제품을 가지고 있고, 또한 규모의 경제에서의 우위를 확보하고 있기 때문에 중국의 신규 플레이어 대비해서 경쟁 우위를 갖추고 있고, 이에 따라서 수익성을 잘 방어할 수 있을 것으로 보고 있습니다. PVC는 결론부터 말씀드리면 일부 조정은 있을 수 있겠지만 현재 양호한 시장이 지속될 것으로 보고 있습니다. 수급 측면에서 안정적으로 가격이 올라가고 있고, 또한 당사가 보유한 에틸렌법 PVC 같은 경우는 저탄소 이슈로 인해 전석법 PVC 대비 경쟁 우위를 확보하고 있습니다. 또한 PVC만이 아니라 가성소다에서도 이차전지의 전신규 수요가 확대되고 있기 때문에 향후에도 양호한 수익성을 가지실 수 있을 것으로 보고 있습니다. 이상입니다.
Maybe I can address the question that you had for the petrochemical business. If the lockdown situation in China does continue and becomes more intense, then we do think that it will have an impact on the downstream industries in the area of home appliances and also automobiles. And as a result of that, also for the production sites that we have in China, there could be a negative impact there. That may be of a bit of a concern. As a result of that, we do think that the China ABS operations may have an impact.
However, on the flip side of that, if we look at the PVC products, because of infrastructure potential and also the possibility of economic stimulus taking place, we would actually have to see what the impact is, whether it's negative or positive, at the end of the day. For ABS and PVC, to talk about our mid to long-term intentions and strategies, first, on the ABS side, I think that for the next two years or so, there are large capacity additions from China that are expected. As a result of that, from the second half of this year, we do think that there will be some pressure on the supply that comes into the market. As a result of that, we do think that the market backdrop will weaken.
However, because we are the global number one player in ABS, and in addition to that, the product portfolio that we have is differentiated in terms of providing, for example, transparent ABS or other types of products. We do think that that factor, added to the fact that we have been able to achieve an economy of scale in this area, enables us to have a point of differentiation versus the new players that are emerging in the Chinese market. As a result of that, we do think that we would be able to defend our bottom line.
On the PVC side, I would have to say that we do think that again there could be some adjustment in the market in itself, but overall, we think that the market will continue to be robust. We do think that because the supply-demand dynamics are a bit more stable, that as we continue to see an improvement in the overall utilization, that should be helpful. In addition to that, in terms of the processing methods that we use versus the ethylene-based methods that we're using versus the carbide-based PVC, does have an upper hand, so that also is in our benefit. In addition to that, in the area of caustic soda, we also see that there is increasing demand coming from secondary batteries.
As a result of that, we do think that there is profitability that we would be able to enjoy in that area also.
This is the CFO, Cha Dong-Seok , and maybe I can address your second question about our overall shareholder return policy and including any intention to maybe purchase some treasury shares. I think that with regards to this topic, the company's position is that we need to look at this with a long-term horizon and a long-term view. As you are aware, if we look at the current market environment, there is an increasing emphasis on going green and also reducing carbon emissions.
In the petrochemical industry, we do believe that this is a two-folded situation in which on one side there are risks that we have identified that could actually have an impact on the livelihood of our operations. At the same time, we do actually believe that this backdrop also provides us with new opportunities and a vast array of new business initiatives that we may look at. As a result of that, in addition, for the battery and also EV market, the growth that we see in this area has exceeded all expectations that people have laid out, and it does continue.
As we have mentioned before, for the time being, we do think that to make use of these new business opportunities and to be able to address these opportunities in a timely manner, that we will need to continue to invest into our three new business areas that we have mentioned before and continue to foster these areas as new growth drivers. For the time being, we do believe that there will be a need to focus our R&D and CapEx efforts within these three areas. On a per year basis, if we look at the CapEx for the next five years, we do think that for each year there will be a need to invest around KRW 4 trillion-KRW 5 trillion. That would be a large investment that would be required for the time being.
In addition, for these new business areas to be able to launch them in a timely manner, we also believe that being very focused is very important. What we want to do is be able to drive those initiatives, achieve growth, and at the end of the day, increase the overall firm value and the enterprise value of our company. We do believe that in the longer term that that will also be in the benefit of our shareholders.
The next question is from the line of Parsley Ong from JP Morgan. Please go ahead.
Hi, congratulations on the good result, thank you for the chance to ask a question. I have two questions. The first question is on your advanced materials division. Obviously, this was the highlight, your OP margin rebounded to 10% in first quarter. Could you share with us some of the key drivers behind that? For example, what portion came from the rollout of NCMA cathodes, or was it because of your new separators division? Over the next few quarters, how sustainable do you think this 10% OP margin is? In the mid to long term, do you see potential for margins to be higher or lower for the advanced materials division? The second question is with regards to your single crystal cathodes. Could you share with us when does LG Chem plan to launch single crystal cathodes?
What would be your expected capacity or margin for single crystal cathodes? For example, for margins, would this be higher than your existing cathode margins, for example? Also maybe please share with us some of the benefits of single crystal cathodes with existing products. Thank you.
So maybe I can address the first part of your question first, and then talk about the other parts. For the first quarter performance, in terms of the OP margins, I do think that if we look at the drivers behind that, of course, the cathode materials would be a big driver, as mentioned before, the 20% that we have in the high nickel cathodes, and also, the high-end or premium products, high value-added products, such as OLED related materials and also, semiconductor related materials have increased in terms of overall contribution. So that has had a positive effect. In addition to that, there also has been the effect of metal prices increasing.
In the first quarter, because of higher metal prices, there has been somewhat of a lagging effect on the inventory that we had. That was also a plus factor for us. Going forward, we do believe that this level of margins will be sustainable, if not improved, because of the portion of our high-end products will continue or high value-added products will continue to increase, which should result and also translate into better profitability for our business. In addition to that, for the separator business, from 2025, we will be able to actually start to include the raw separators themselves, or the material that we have the rolls into our overall operations.
Again, over the mid- to long-term, we do think that there are various elements that indicate that the overall margins will improve.
저희가 청주에 있는 공장을 개조해서 일반 그 다결정 이차 입자를 생산하는 공장을 개조를 통해서 단입자 생산에 대한 준비는 이미 완료를 하였습니다. 단결정 제품 같은 경우에는 고온 수명하고 안정성이 개선이 된 제품이기 때문에 일반 그 다결정 이차 입자 제품 대비해서는 프리미엄 가격이 형성되어 있고, 그래서 더 높은 수익성을 기록할 것으로 예상을 하고 있습니다.
To address your second question about the single crystal cathodes. I think that in terms of the revenue generation, this is something that will start in the second half of this year. For the capacity that we have in Cheongju, the factory there, we have modified it to be able to produce single cathode, single crystal products. That overall conversion has already been completed. In addition to that, if you compare the products themselves, they have a longer life and also are more stable. As a result of that, there is a premium in terms of the pricing that you, that people are able to enjoy. As a result of that, we do think that it will lead to better profitability.
네, 다음 질문 받도록 하겠습니다. 다음으로 질문해주실 분은 골드만 삭스의 니킬 반다리님입니다. 질문 부탁드립니다.
The next question is from the line of Nikhil Bhandari from Goldman Sachs. Please go ahead.
Yes. Hi. Thank you so much, and thanks for the opportunity to ask questions. Two questions from me. Firstly, on the cathode business, can you share how much of your current cathode capacity is NCM 622 versus 811 versus others? LG Energy Solution is also planning to do LFP battery for ESS and also the high manganese chemistries in future. Is LG Chem also planning or is already working on such cathode materials? Or will the focus for LG Chem's cathode business be continue to be on NCM batteries cathode and more for the pouch batteries? I think if you can just share your more medium term plans and away from NCM as well, that'll be great. Second question is on the Petchem business.
Can you share how much of impact we have seen from naphtha lagging impact in terms of benefit to the operating profit of Petchem in the first quarter? Also in this challenging tight naphtha environment, how's the sourcing strategy for naphtha? Is LG Chem able to source naphtha at a competitive price, or do we have to pay premiums? Yeah. I think those two will be my questions. Thank you.
감사합니다. 두 가지 질문에 대해서 여쭤보고 싶은데요. 첫 번째는 첨단소재 관련된 양극재에 대해서 좀 여쭤보고 싶습니다. 지금 양극재의 사업을 저희가 양극재 유형별로 만약에 좀 나눈다면, 예를 들어서 NCM 622, 811 그리고 기타 이런 식으로 만약에 나눠서 생각을 해보게 된다면 그 각각의 비중이 어느 정도인지가 궁금하고요. 그다음에 LG Ensol 차원에서 LFP 배터리를 개발을 할 계획들을 갖고 있는 걸로 알고 있습니다. ESS용 LFP도 있고요. 그다음에 high manganese chemistry와 관련돼서도 개발할 의향들이 있는 걸로 알고 있는데, 그러면은 LG 화학단에서는 이런 여러 가지 배터리와 관련된 양극재를 생산하실 계획이 있으신지 궁금합니다. 아니면 혹시 당분간은 그냥 NCM에 좀 포커스를 두면서 사업을 꾸려가시려고 생각을 하시는지 좀 궁금하고요. 혹은 pouch 쪽에만 좀 집중하시고자 하시는지, 좀 중기적으로 NCM 외 쪽 사업은 어떻게 지금 꾸려가시려고 생각을 하시는지 좀 일반적으로 말씀해주시면 좋을 것 같습니다.
그다음에 두 번째 질문은 석화와 관련돼서 좀 여쭤보고 싶습니다. 석화 관련돼서 이제 나프타 가격이 많이 올랐는데 그에 대한 이제 그 재고에 대한 래깅 효과가 있다고 생각이 되어지는데요. 일분기에 저희가 영업이익률 마진에 이 래깅 효과가 얼마만큼의 플러스 기여를 했는지, 혹시 뭐 그 규모를 좀 가늠해서 말씀을 좀 해주실 수 있으신지가 궁금하고요. 거기에 덧붙여서 이제 아무래도 지금 납사 시장이 굉장히 타이트하기 때문에 좀 굉장히 어려운 시장이라고 생각이 되어지는데, 납사 소싱은 어떤 방식으로 지금 진행을 하시는지 궁금합니다. 예를 들어서 경쟁력 있는 가격으로 납사를 소싱하는 것이 지금 환경에서도 가능하신지, 아니면은 뭐 프리미엄을 지급을 하고 소싱을 해야 하는 그런 입장이신지 궁금합니다. 예, 양극재 관련돼서 그 제품별
그 비중에 대해서는 직접적으로 사실 말씀드리기는 좀 어려울 것 같고요. 근데 이제 현재 그 high nickel 제품의 비중이 한 20~30%가 된다는 거 우선 말씀드리고, 내년부터는 대부분의 매출이 high nickel 그 양극재에서 발생을 할 예정입니다.
에너지 솔루션의 LFP, ESS용 LFP 계획을 말씀을 주셨는데, 저희는 현재는 EV 배터리용 양극재에만 집중을 하고 있고, 현재까지는 LFP를 검토 중이긴 하지만 개발을 진행하고 있지는 않습니다. 저희는 volume zone, 그러니까 자동차의 volume zone에 대응해서는 Ensol 포함해서 다양한 고객들과 manganese 제품들에 대한 협의를 하고 있고요. 현재 출시 계획은 2024년도입니다. 근데 이제 리튬의 가격에 따라서 manganese의 원가 경쟁성이 흔들릴 수 있기 때문에 저희가 고전압 low nickel 제품들을 추가적으로 개발을 검토해 진행을 하고 있고요.
For the cathode question that you have, maybe to answer that, in terms of the breakdown between the different cathode types that you have mentioned, unfortunately, we would not been able to give you specific numbers. What I can say is that the high nickel cathodes account for around 20%-30%, and we think that going into next year, that most of the revenue generated will be from high nickel cathodes. In addition to that, you also asked about LG Energy Solution, LFP for ESS purposes. As of the current time, the focus that we have is for EV batteries, and as a result of that, for LFP, we have reviewed the possibility of LFPs.
However, we're not currently in a situation in which we are developing anything in that area. In addition, on the EV side, for the more mass products or the quote, unquote, "volume zone," of the market, we do recognize that there is a need and demand for manganese chemistry, and we think that is something that we will be able to address from 2024. However, that having been said, the market timing or how the market actually plays out going forward, we do think it would depend upon how lithium prices trend going forward, because the overall competitiveness of manganese could differ according to where lithium prices sit.
As a result of that, we're also looking at high, l ow nickel but, high voltage low nickel chemistries and materials that we would be able to produce. Not only are we looking and trying to address the premium market, but we're also developing a wide range of materials to address the more mass market or volume zone within the market.
Maybe to address the petrochemical question that you have had with regard to the overall naphtha market and our sourcing capabilities. For the sourcing of naphtha from a very long period back, we have been able to diversify our sourcing, the sources through which we purchase, to ensure that we are able to mitigate any supply risk that we may have.
Currently, in terms of regions, not only do we source from Korea, but we also source from the Middle East, from India, and also Africa. In addition to that, if you look at the contract format, we are continuously increasing the amount of direct purchases or direct imports that we have. Not only are we making efforts on that side, but at the same time, for the capacity that we actually hold, we are trying to ensure that the feedstock that is used, not only can it use naphtha, but we're also increasing the portion that can also use LPG, because we do see, you know, the change in the overall market prices. As of now, around one-quarter of the capacity has been converted to be able to use LPG, if necessary.
We continue to compare the LPG prices versus the naphtha prices and flexibly adjust the mix according to the situation. To address your question about what the naphtha lagging effect was in the first quarter, unfortunately, we won't be able to share with you specific numbers. It did have a healthy contribution. However, in the second quarter, we do think that the same lagging effect will have a negative impact on the overall performance.