Good afternoon. We will now start LG Chem's 2024 Second 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 schedule. We will begin with a brief introduction of 2024 Q2 Earnings Performance, followed by the CFO presentation on the highlights of this quarter's earnings. Then we'll close with 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, Yoon Lee, in charge of company's business planning, Choi Ho-Young from Petrochemicals, Young Seok Lee from Advanced Materials, and Hyun-Jin Cho from Life Sciences. First, Q2 business performance on page 3, consolidated Q2 sales and P&L. Q2 sales increased Q2 at KRW 12.3 trillion. Operating profit was KRW 406 billion, and OP margin was 3.3%. Next, on page 4, consolidated financial performance. As of the end of Q2 2024, assets were KRW 84 trillion, liabilities KRW 39.9 trillion, and capital was KRW 44.3 trillion. Balance ratio was 90.2%, similar to the previous quarter, and while total liability-to-equity ratio decreased Q2, net liability-to-equity ratio slightly increased. Next, earnings by business division. Page 5, Petrochemical division. 2024 Q2, Petrochemical business recorded sales of KRW 4.966 trillion and operating profit of KRW 32 billion.
Despite strong raw material prices, we recorded an operating profit backed by increased sales of ABS and other major products as home appliances and other downstream markets entered their peak season. Going forward, we expect a gradual improvement in the supply-demand balance, but the improvement in profitability will not be significant as global demand remains sluggish, such as in China, and factors such as rising freight rates. Next, advanced materials. In Q2, advanced materials sales was KRW 1,728 billion, a 9% increase Q2, and operating profit was KRW 170 billion. Despite concerns about slowing EV growth, battery materials sales and profitability both improved due to expanded battery materials shipments, and the profitability of the advanced materials division improved due to an increase in the share of high-value-added products in other segments, such as electronic materials.
In the third quarter, we expect battery materials shipments to decline slightly due to weak downstream demand. However, we expect profitability to further improve as metal prices stabilize. Next, life sciences. In Q2, sales was KRW 404 billion, and operating profit was KRW 109 billion. In addition to the growth of major products such as diabetes treatments and vaccines, sales and profitability temporarily increased due to the recognition of down payments for out-licensing of rare obesity treatments. Sales of major products are expected to continue to be solid, but profitability is expected to be low for the time being due to clinical trials for projects such as phase 3 gout treatments. Next, PharmHannong. Q2 sales was KRW 238 billion, and operating profit was KRW 20 billion. Overseas sales of crop protection products continued to expand, but profitability declined year-on-year due to lower fertilizer prices. Lastly, Energy Solution.
This morning, Energy Solution presented their performance in detail during its earnings call. However, we'll briefly present its performance here. Energy Solution's Q2 sales was KRW 6,162 billion, operating profit was KRW 195 billion, and OP margin was 3.2%. Lower metal prices continue to impact selling prices, but with higher shipment volumes due to new EV launches by North American customers, sales and AMPC amount both increased. We expect sales to decline from the initial forecast due to slow EV growth and continued weakness in metal prices. Based on the changing market demand, we plan to improve operational efficiency by managing utilization rate through production speed adjustments. On this note, we will conclude the Q2 earnings presentation and invite CFO Dong Seok Cha to present the earnings outlook.
Good afternoon. This is CFO Dong Seok Cha of LG Chem.
Thank you for taking time out of your busy schedules to join our earnings call. Thank you for your interest. First, looking back at our performance in the second quarter, we continued to face challenging conditions in the petrochemical industry and slowing growth in the global EV market. But we posted improved results compared to the previous quarter due to a turnaround in our petrochemical business, greater battery materials shipment, and the recognition of upfront revenue from the out-licensing of an orphan obesity treatment drug. As we look to the third quarter and the full year, looking ahead, we expect the business environment to remain challenging for the foreseeable future with the global economic downturn continuing, including weak demand in China, slower than expected growth in EV demand, and rising freight rates.
In particular, due to the slowdown in EV sales, we recognize that there are a number of concerns about the outlook for LG Energy Solution's battery business and LG Chem's battery materials business. However, while demand for EVs may be volatile in the short term depending on a number of variables, we believe that the market will grow robustly in the mid to long term as better quality EV models are scheduled to be launched by our OEM customers. In these challenging times, we want to get back to the basics and do everything we can to improve the fundamental competitiveness of our businesses. First, for mid to long-term growth, we will continue to strengthen our business competitiveness by focusing on investment and R&D activities to foster three new growth engine businesses.
Second, we want to be more conservative and prudent in our investment decision-making and investment execution, taking into account industry conditions, market volatility, and macro uncertainties. We're also expanding our cathode capacity in line with our efforts to expand our customer portfolio, and we'll flexibly adjust the pace of investment in line with market demand. Third, to improve profitability, we will continue to optimize our operations by further enhancing our management capabilities, including cash flow management and cost reduction. Shareholders and investors. Even in a difficult business environment, we seize the opportunity to enhance our business competitiveness by fiercely improving efficiency internally and preparing our growth engine businesses well, and we'll do our best to become a company that can take a further leap forward. We look forward to your support. Thank you.
Next, we will start the Q&A.
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.
Jin Myung Lee from Shinhan Securities. Please ask your question.
The first question is from the line of Jin Myung Lee from Shinhan Securities. Please go ahead.
네, 안녕하세요. 신한투자증권 이진명 연구원입니다. 먼저 질문 기회 주셔서 감사드리고요. 저는 두 가지 질문 드리도록 하겠습니다. 첫 번째는 첨단 소재 사업부에 관한 질문인데, 저희 오전에도 진행을 했지만 LG 에너지 솔루션 가이던스 하향이랑 GM 쪽 실적 좀 부진 관련해서 저희 하반기랑 올해 양극재 출하랑 가이던스 변동이 있으신지 관련된 부분 말씀해 주시면 감사할 것 같고, 이어서 지금 마지막 장표의 CapEx 조정에 대한 부분도 말씀해 주셨는데, 그 부분도 한번 같이 설명해 주시면 감사하겠습니다. 그다음에 두 번째 질문은 화학 쪽에 대한 질문이고요. 지금 화학 업황이 최근 들어 다시 조금 둔화되는 모습을 보이고 있는 상황인데, 지금 미관심 관련된 효과가 지속 가능한지에 대해서 좀 말씀 부탁드리고, 하반기랑 연간으로 봤을 때 화학 쪽에 대한 업황에 대한 전망 부분 같이 말씀해 주시면 감사하겠습니다.
Thank you for the opportunity to ask questions. There are two questions that I would like to ask you. The first question is about your advanced materials business. This morning, LG Energy Solution did do their earnings release during which they did mention that the guidance for the year would be adjusted downward, and also that with regards to their supply to GM, that would also be somewhat adjusted. So, as a result of that for LG Chem, what is the outlook for the second half of the year and also for the full year? In addition, for the cathodes business that you have in terms of any capacity adjustments, if you could talk about that business, that would be appreciated. Secondly, I would like to ask about your petrochemicals business. It does seem to be that the market, again, is turning towards a slowdown.
In China right now, there is the trade-off deal for new type of policy in place and other measures. So, towards the second half of the year and for the full year, what would be the outlook for the market?
첫 번째로 양극재 가이던스 관련된 답변 드리도록 하겠습니다. 주요 OEM들이 올해 EV 생산 계획을 조정 중에 있어 LG 에너지 솔루션도 금일 오전 실적 설명회에서 올해 매출 계획을 하향 조정하여 발표하였습니다. 양사도 고객의 생산량 조정 계획에 따라 올해 양극재 출하 가이던스를 전년 대비 40% 증가에서 20% 증가로 하향 조정하도록 하겠습니다. 3분기 양극재 판가는 2분기와 유사할 것으로 전망되지만, 주요 고객의 재고 조정이나 감산 등으로 2분기 대비해서 20% 물량 감소가 예상됩니다. 그러나 수익성 측면에서는 2분기 대비 메탈의 부정적 재고 효과가 감소하면서 2분기 대비 다소 개선될 것으로 보입니다. 기존 대비 하반기 물량 감소에도 불구하고 전년 대비 하반기 물량은 20% 이상 증가할 것으로 보고 있고, 연간으로는 전년 대비 물량 20% 증가, 메탈 가격 하락에 따른 판가 40% 이상 하락으로 매출은 전년 대비 30% 감소할 것으로 예상됩니다. 연간 수익성은 상반기 메탈 역내긴과 하반기 물량 감소로 한 자릿수 중반 수준으로 전망하고 있습니다.
So, this is Young Seok Lee from Advanced Materials, and maybe I can address your first question about the cathodes guidance for the year. If you look at the key OEMs this year for EV production and also the overall volume that they are producing, it is somewhat being adjusted, and LG Energy Solutions, as you have mentioned during their morning earnings conference call, also adjusted their overall guidance for the year in a downward method. So, as a result of that, for the company also, according to the adjustments that are taking place at our clients, we also, with regards to shipments, are adjusting our guidance from the previous 40% plus on a YOY basis to 20% on a YOY basis.
In addition to that, in the third quarter, for the ASP, as metal prices are stabilized, we do believe that it will be maintained at a level flat to the second quarter. In addition to that, at the key customer level, there are various inventory adjustments and also production adjustments that are taking place. We think that versus the second quarter, in terms of the overall volume, it will decrease by around 20%. However, in terms of profitability, we do think that the negative effect from the lagging metal prices versus the previous quarter will decrease, and as a result of that, on a Q on Q basis, that profitability should improve versus the second quarter. Towards the second half of the year, though, we do believe that there will be some adjustments in volume.
For the overall total volume on the second half of the year, we still believe it will grow 20% on a year-over-year basis. In addition to that, if you look at the ASP side, due to the fall in metal prices, which have fallen more than 40%, we do think that the overall full year revenue, as a result, will decline by 30%. However, for the full year profitability, because of the 20% plus increase in the overall volume and also the lessened effect of the metal prices on ASP, we do think that full year profitability will be in the mid single digit level.
다음으로 석유화학 시황 및 중국 이관신 정책 영향 등에 대해서 답변 드리겠습니다. 석유화학 하반기 시황은 수급 밸런스의 점진적인 회복이 예상됩니다. 하지만 중국 부양책 효과는 그다지 크지 않을 것으로 전망된 반면, 글로벌 해상 운임은 지금 대폭 상승이 되어서 당분간은 2분기와 유사한 시황, 수익성이 전망되고 있습니다. 중국 이관신 정책에 대해서는 제품별로는 상이하지만 수급 밸런스의 회복 이상의 큰 폭의 효과는 없는 것으로 보이고 있고, 제품별로 보면 자동차 가전 분야의 ABS나 고무 제품 같은 경우에는 소폭의 수요 회복 및 공급 과잉의 완화 정도의 수준에 그칠 것으로 보이고, 부동산 건축 분야의 PVC와 같은 제품들은 수요 회복 부진은 지속되고 있고 공급 과잉도 지속되고 있어서 당분간은 큰 폭의 회복은 기대가 되지 않고 있습니다.
So, maybe to address your second question about the petrochemical outlook that we have and also the impact from China's policy to trade old with new, if you look at the second half dynamics between the supply and demand situation, we do expect it to be a gradual recovery. However, in terms of the actual support measures that have been released by the Chinese government, the effects of that do not seem to be very large. And added to that, right now, if you look at the freight cost for shipping in general, it has increased significantly. So, as a result of that, we do think that the second quarter will continue in terms of the momentum and towards the second half of the year so that the market backdrop and also profitability outlook should be similar.
For the Chinese trading old for new policy, we do think that the impact of that will be different from product to product. However, in terms of the overall balance on the supply and demand side, we don't think that it will be very large. So, to look at it in more detail by product, if we look at the electronic goods and also the ABS and also rubber area, the overall recovery and the demand does not seem to be very large. However, there does seem to be some better situations taking place in terms of the overall supply situation. So, as a result of that, we do think that that will have an impact. On the PVC side, related to construction material, the overall demand does not seem to be taking place in terms of recovery.
However, and in addition to that, on the supply side, the oversupply situation continues to prevail. As a result of that, the market is not recovering yet.
to ask a question is Parsley Ong from JP Morgan. Please go ahead with your question.
The next question is from the line of Parsley Ong from J.P. Morgan. Please go ahead.
Hi, thank you for the chance to ask a question. This is Parsley from JP Morgan. Firstly, on your advanced materials division, it seems to be doing quite well in 2024 compared to the weakness that we are seeing for LGS, as you mentioned earlier. But looking at longer term, could you give us some color on the market condition you are seeing? What capacity or volume plans are you expecting, or is there potential for any changes in your capacity or CapEx plans? And if you could give us more color individually for cathodes, separator, IT materials, etc., that will be appreciated. Second question is on chemicals. So, very encouraging to see the profit turnaround. I think looking at longer term, the company has been pursuing efforts to improve the profit. So, can we get an update on your chemical business restructuring?
For example, previously you were thinking of doing a partial sale of your naphtha cracker or doing a joint venture or other restructuring plans. What are some of the measures LG Chem is pursuing to enhance the profitability and cash flow longer term? Thank you.
질문 주의 기회를 주셔서 감사드립니다. 저는 JP Morgan의 Parsley라고 합니다. 첫 번째 질문은 첨단 소재 관련된 질문을 드리도록 하겠습니다. LG 엔솔이 2024년 약간 실적이 전반적으로 좀 부진함에도 불구하고 회사는 상대적으로 2024년 실적을 잘 끌어가고 계시는 것 같습니다. 근데 저희가 장기적으로 조금 관점을 돌려서 생각을 해보게 되면요, 전체적인 시황에 대해서 어떻게 생각하시는지 궁금합니다. 그리고 회사 차원에서 지금 capacity와 관련돼서 전체적인 규모 계획과 관련된 부분들이라든지 아니면 CapEx 투자와 관련된 부분들에 있어서는 혹시 변화의 여부가 있는지 궁금합니다. 이런 부분에 대해서 여러 가지 제품별로 양극재, 분리막, 그리고 기타 소재로 좀 나눠서 말씀을 해주시면 도움이 많이 될 것 같습니다. 두 번째 질문은 이제 석화와 관련된 질문을 드리도록 하겠습니다. 흑자 전환이 되었다고 하는 부분들은 굉장히 고무적인 것 같습니다. 근데 이 부분에 대해서도 저희가 장기적으로 좀 생각을 해보게 되면 회사가 수익성을 개선하기 위해서 이전에도 여러 가지 계획들을 가지고 계셨었던 걸로 알고 있습니다.
예를 들어서 NCC와 관련돼서 일부 매각을 추진을 한다든지 아니면 좀비 형태, 이런 식의 구조조정이라든지 아니면 다른 여러 가지 조치들을 통해서 수익성과 현금 흐름을 강화시키기 위한 조치들을 생각 중이셨던 걸로 알고 있는데요. 이에 대한 업데이트가 있다고 한다면 좀 공유해 주셨으면 좋겠습니다.
양극재 CAPA 관련 답변 드리도록 하겠습니다. 작년 말 착공된 국내 구미 공장의 램프업과 2026년 6월 초도 양산을 목표로 건설 중인 미국 공장은 계획대로 진행할 예정입니다. 다만 2026년 이후 양산을 목표로 검토 중이었던 국내 NCM 양극재, 모로코 LFP 양극재 투자는 고객과의 물량 조정을 토대로 가동 일정을 순연하고 기존 자산의 가동률 상향 등 자산의 효율성 제고 후에 CAPA 확대를 이어갈 계획입니다. 이에 따라서 2026년은 미국 초도 양산 CAPA만을 반영할 경우 약 200,000 톤 수준이며 2028년까지 이어질 미국 공장의 램프업 외에는 2026년 이후 CAPA 계획은 투자 계획 조정 후에 다시 공유드리도록 하겠습니다.
So, maybe I can address your first question about the capacity adjustments that we would have for the cathode business. If you look at the overall capacity expansions that we have had that started at the end of last year in terms of groundbreaking, for example, with regards to the Gumi factory, right now we are going ahead with the ramp-up as scheduled. Also with regards to the US plant expansion and site, which is targeting 2026 for the initial production, that is on plan as we have expected. However, if we look at the situation after 2026 with regards to NCM cathodes and also the Morocco LFP investments, we do believe that there will be some pushback in those capacities.
We want to first focus on the existing capacity that we have available in enhancing the overall utilization of that and also enhancing the capacity operational effectiveness and deficiencies before we think about our CapEx expansions. As a result of that, for 2026, if we look at the U.S. alone, we think that that expansion will be around 200,000 tons. Then if we look at after 2026 to 2028, we do think that in the capacity plans for plants outside of the North America capacity that we have, we are in the process of re-reviewing that. I do believe that we will be able to share the details later on.
SQ와 GATE 중기적 관점에서의 구조적 수익성 개선 방향에 대해서 답변 드리겠습니다. 항사는 더딘 수요 회복과 누적된 공급 과잉 상황 하에서 사업 경쟁력을 강화하는 차원에서 여러 가지 전략적인 옵션들을 검토하고 있습니다. 하지만 NCC, JV 등에 대해서는 아직 확정된 바가 없습니다. 반면에 상반기에 SM, EG 등 공장을 가동 중지하였고 이와 같은 가동 중지 상황은 소규모 비핵심 사업 또는 외부 소싱이 가능한 중간 원료를 좀 합리화하면서 사업 구조를 재편해 가고 있습니다. 사이클이나 수급 밸런스 의존도가 큰 범용 제품군은 코스트 경쟁력 강화에 단기 집중을 하고 있고 장기적으로는 고부가 어플리케이션 그리고 새롭게 성장하고 있는 서스테너빌리티 사업을 확대하고 있고 지역별로는 판매나 생산 측면에서 구미 지역으로 다변화 전략을 통해서 중장기 경쟁력을 키워나가고 있습니다.
Maybe to answer the second question about our petrochemical business and the overall longer-term plans to try to structurally improve our profitability, right now with regards to the market backdrop in dealing with the sluggish demand and also oversupply situation that we have right now, to ensure that we are able to strengthen our core competitiveness, the company is looking at various options that are available. However, with regards to specifically the NCC JV, as of now, we have not made any determinations there. If you look at the first half of the year on the SM and EG side for capacity that we had, we have halted capacity there. And for the smaller scale non-core business areas and also for the intermediate material in which outsourcing would be possible, we are in a process of rationalizing those business areas and engaging on restructuring efforts.
In addition, for cycle-based materials or for more commodity-type areas, we are trying to look at how we can enhance the overall cost competitiveness of those areas. And over the longer term, for the high-value areas and also the sustainability-related areas, we do want to gradually expand our presence in those areas. By region, with regards to our overall sales and production capabilities, the Americas would be an area in which we want to engage upon various diversification strategies so that we can strengthen our overall mid to long-term competitiveness.
다음 질문 받도록 하겠습니다. 다음으로 질문해 주실 분은 미래에셋증권의 이진호 님입니다. 질문 부탁드립니다.
The next question is from the line of Jinho Lee from Mirae Asset Securities. Please go ahead.
네, 안녕하십니까. 미래에셋증권 이진호입니다. 질문 기회 주셔서 감사합니다. 크게 두 가지 질문이 있습니다. 첫째는 전지 소재 관련 질문입니다. 미국 대선 결과에 따라서 전지 소재 사업 영향과 전략 변화가 있을 수 있는지가 궁금합니다. 구체적으로는 IRA 영향이 있을지에 대한 당사의 의견과 그리고 테네시 양극재 공장에 대한 계획 변화 가능성에 대해서 좀 말씀해 주시면 감사하겠습니다. 두 번째는 CapEx 질문입니다. 중장기적으로 CapEx 계획 변동이 있는지 조정이 있다면 어느 부분일지 말씀 부탁드리고요. 이에 따라서 엔솔 지분 활용 여부와 그리고 자금 조달 계획도 함께 말씀해 주시면 감사하겠습니다.
So, thank you for the opportunity to ask questions. There are two questions that I would like to ask you. With regards to your battery materials business, we do believe that this is a business that could be impacted according to the results of the U.S. elections. So, how do you see the outcome of the elections impacting your business and how, if at all, strategy would change accordingly? In addition to that, if we were to talk about in more detail the impact that you can see on the IRA side with regards to the election outcome and also any changes in your plans for the Tennessee cathode capacity, that would be appreciated. The second question that I would like to ask about is your mid- to long-term CapEx-related plans. Are there any adjustments that you are foreseeing in that area?
And if so, in what areas would adjustments take place? In addition, for your funding plans, could you share your funding plans, including any plans to utilize the share that you have in LG Energy Solution? Any discussion about that would be appreciated.
미국 대선에 따른 당사 영향에 대해서 말씀드리도록 하겠습니다. 트럼프 후보자가 재집권 시에 IRA 법안 철폐를 공언하고 있기는 하지만 현실적으로는 법안 폐지보다는 보조금 혜택을 줄이는 방향으로 조정될 것으로 예상을 하고 있으며 보조금 축소가 미국 EV 수요에 부정적인 영향이 있기는 하지만 중장기적으로는 EV 성장은 지속될 것으로 보고 있습니다. 단기적으로는 투자 확대보다는 기존 자산의 효율화와 코스피 혁신 제품 개발에 집중하고 있고 고객과의 물량 계약을 전제로 증설 규모를 확정하는 보수적인 투자 전략을 이어갈 계획입니다. 조금 전에 말씀드렸던 바와 같이 올해 초 착공한 테네시 공장은 GM의 물량 변동과는 상관없이 지난해 체결된 장기 공급 계약을 기반으로 2026년 양산 목표로 계획대로 투자를 진행할 예정입니다.
Maybe I can address your first question about the outcome of the U.S. election and the impact that we foresee. In the case that Trump does take office, right now he is promising that he will get rid of the IRA Act. However, we do believe that realistically, rather than it getting abolished all in itself, that it probably will move in a direction in which the subsidies available would be less. And as a result of that, in the case that the subsidies do decrease, the EV demand in itself may be impacted in a negative manner. But over the long term, we do believe that the overall growth is something that will continue.
For the short-term investments that we have right now, the focus will be in increasing the efficiency of the existing capacity that we have and also ensuring that we have more cost innovation that is taking place. So, based upon the volume contracts that we have already locked in with our customers, we are trying to take a more conservative stance towards investments that we have in general. However, as already mentioned, with regards to the Tennessee capacity, this is something that even though GM has indicated that they have some change in their plans, will not change because this is capacity that is being built out under an already agreed-upon long-term arrangement. So, therefore, we are going ahead as planned with the target of reaching mass production in 2026.
두 번째 질문은 CapEx 변동 여부하고 자금 조달 계획 등에 대해서 말씀드리겠습니다. 올해 CapEx는 3대 신성장 동력 중심으로 당초에는 저희가 한 4조 원 규모로 계획을 했었지만 시황 및 수요 성장세 변화와 매크로한 환경의 불확실성 등을 고려해서 지금 보다 신중하게 집행하고 있습니다. 이에 따라서 올해는 전년도와 유사한 수준인 3조 원 초중반 수준이 될 것으로 전망을 하고 있습니다. 특히 양극재 투자와 관련해서는 최우선 순위임은 변함이 없겠지만 앞에 말씀드린 바와 같이 전방 고객사 감산 기조에 맞춰 연도별 CapEx 계획을 순차적으로 조정할 계획입니다. 그리고 서스테너빌리티 사업에 있어서는 수익성이나 경제성이 현저히 담보되는 사업을 중심으로 자본 투입을 선별하고 있습니다. 향후에도 여러 가지 변동성을 확인해 가면서 보다 엄정하게 투자 집행 기조를 지속적으로 유지해 나갈 계획입니다. 그리고 캐시 확보와 관련해서는 당사는 지금 3월에 원화 사채 KRW 1조를 발행했고 그다음에 팜한농과 첨단소재 사업 매각 대금 등이 하반기에 들어올 계획입니다. 그래서 현재 시점에서는 추가로 자금 조달 계획이 필요한 사항은 아니고요.
이와 관련해서 에너지 솔루션 지분 매각과 관련해서는 지속적으로 말씀드린 바와 같이 저희가 활용 가능성은 배제하지 않고 있지만 아직까지는 구체적인 지분 매각 계획은 없는 것으로 말씀드릴 수 있겠습니다.
So, maybe to address your second question about our CapEx plans, right now, of course, CapEx for this year will continue to be focused on our three main new growth drivers for the future. So, initially, we had expected CapEx to be around KRW 4 trillion for the year. However, in light of the changes that have been taking place in the market backdrop and overall demand situations and also the macroeconomic uncertainties that we are seeing, we have decided to take a more cautious stance and conservative stance towards our CapEx execution. So, as a result of that, we do believe that CapEx for the year will be similar to that of last year at around the low- to mid-KRW 3 trillion level.
In particular, if we talk about our investments in the cathodes area, of course, there is no change in that our cathodes investment will remain a top priority. However, in light of the fact that our downstream customers are cutting down on their production for the year-to-year CapEx plans in themselves, we do believe that on a sequential basis, there will be some adjustments to that plan. With regards to our sustainability business, we are going to invest capital into those businesses in which we clearly see a profitability and feasibility dynamic taking place. In addition to that, in light of future volatilities within the market, we will continue to try to ensure that we execute our CapEx in a more conservative and strict manner.
In terms of our funding plans to secure cash, in March of this year, we did issue KRW 1 trillion in corporate bonds, Korean won-denominated corporate bonds. Towards the second half of the year, we will be receiving the proceeds from the disposal of our polarizer and polarized material business. As a result of that, for this year, we don't have any additional funding needs. However, that has been said specifically about the utilization of the shares that we have in LG Energy Solution. As we have continued to communicate to you before, we are not excluding the possibility of utilizing these shares. However, as of now, we do not have any detailed plans or anything that we have decided to share with you.
question is Jae Seong Yoon from Hana Securities. Please go ahead with your question.
The next question is from the line of Jae Seong Yoon from Hana Securities. Please go ahead.
질문 기회 감사합니다. 하나증권 윤재성입니다. 첫 번째 질문은 석유화학 쪽이고요. 최근에 경쟁사의 상황을 보면 물량이 증가하는 부분들을 말씀하시는 회사들이 있습니다. 우리의 석유화학 사업부 중에서 물량 증가가 눈에 띄는 제품군들은 어떤 제품군들이 있는지 궁금하고요. 그 물량 증가의 폭이 어느 정도 되는지 공유 가능하시면 말씀 부탁드립니다. 두 번째는 방금 전지 재료 사업에 대한 속도 조절에 대해서 계속 말씀 주고 계신데, 분리막 투자라든지 혹은 업스트림 쪽으로도 저희가 계획을 하셨던 걸로 알고 있습니다. 그래서 분리막 투자라든지 업스트림 확장 전략에는 어떤 변화가 있을 수 있는지에 대해서 말씀 부탁드립니다.
Yes, thank you for the opportunity to ask questions. There are two questions that I would like to ask you. First is about your petrochemicals business. First, if you look at your competitors, it does seem to be that some of the competitors have increasing their supply and adding supply into the market. So, if we look at our business and the portfolio that we have in terms of product areas, in what areas do you actually see notable increases in volume coming in from the competition, and to what degree is that taking place? The second question that I would like to ask you is about your EV battery materials business. You did talk about moderating the speed of expansion.
However, specifically to ask you about your intentions for CapEx related to or investments related to your separators business and on the upstream side, I do understand that you had plans there initially. So, is there any change in that stance?
네, 석유화학 제품별 판매량 증가에 대해서 말씀드리겠습니다. 전반적으로 계절적 성수기 진입하면서 섹터별로 다르지만 일부 제품들은 판매가 증가하고 있습니다. 대표적 제품군으로 말씀을 드리면 구미주 판매 위주인 폴리올레핀 계열의 제품, 그리고 가전 쪽의 ABS, 자동차용 고무, 반도체용 C3, IPA 등이 대표적인 제품들이고, 1분기 대비해서 증가 폭은 5%-15% 정도 매출이 성장하였습니다. 이와 별개로 친환경 쪽의 바이오 납사를 활용한 친환경 BCB 제품은 브랜드 오너 고객과의 의미 있는 신규 매출을 지금 추가로 확보를 해가고 있습니다.
So, to talk about where we see the volume increase in terms of sales taking place on the petrochemical side, because we have entered into a seasonal high season, it is different from sector to sector, but within the portfolio, as you have mentioned, we do see sales increasing taking place. To share some of the examples, first on the polyolefin side from Gumi, we do see some increase there. Also, related to electronic goods, ABS is increasing, and also for automotive rubber, there have been increases there. And for related to semiconductors, C3, IPA has also been increasing. So, if you look at the level of increase versus the first quarter, it has been around 5%-15% based upon the top line.
In addition to that, with regards to more green products for the bio-naphtha-related BCB business, we have had various constructive discussions with brand owners in terms of new demand, and that has also been beneficial in terms of sales.
the competitiveness of Chinese separator companies, etc. In particular, in the case of the fabric business, which is the upstream of the separator business, considering the change in the strategic direction of the separator business of our partner Toray and the market situation, we are completely reviewing the contents previously agreed with Toray and examining various strategic options.
So, maybe to address your second question about our separator business, in light of the changes in demand that we see on the EV battery side and also the competitive dynamics coming from the Chinese players, right now, with regards to our plans for separators, this is something that we are currently re-reviewing. So, specifically with regards to upstream investments and separator raw rolls, as Toray has changed its strategic direction in this business and due to the changes in the market environment that are taking place, right now, any discussions that we have with Toray are being re-reviewed. And as a result of that, we're in a position right now in which we are reviewing all of the strategic options available to us.
Yoo Jin-jeong from Hi Investment & Securities. Please go ahead with your question.
The next question is from the line of Yoo Jin-jeong from Hi Investment & Securities. Please go ahead.
네, 안녕하세요. 하이투자증권 전유진입니다. 질문 기회 주셔서 감사합니다. 일단 첫 번째는 석화 쪽에서 질문이 하나 있는데, 저희가 아까 미주 쪽으로 포트폴리오를 확대해 갈 거라고 얘기해 주신 것 같아요. 지금 미주 쪽으로 나가는 비중이 얼마나 되시는지, 그리고 이걸 앞으로 어느 정도 늘리려고 하시는지 말씀해 주시면 감사드리겠고요. 또 대선에서 트럼프 후보가 당선이 됐을 때 저희 석화 쪽 영향은 어떻게 보시는지 같이 코멘트 주시면 감사드리겠습니다. 그리고 두 번째는 저희가 이번에 생명공학에서 라이선스 아웃했던 기념 추이들 때문에 일시적으로 수익성이 되게 좋았던 것 같은데, 단기 혹시 비슷한 파이프라인 라이선스 아웃 같은 걸 좀 기대할 만한 게 있는지 업데이트 주시면 감사드리겠습니다. 사연입니다.
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 the petrochemicals business. If we look at the petrochemicals business, I think that something that you had mentioned is that you are planning to expand your product portfolio with regards to North America. As a result of that, what would be the actual contribution that North America makes now, and how do you see that expanding going forward? In addition to that, if Trump wins the elections, what impact do you think that that will have on your petrochemical business as a whole? The second question that I would like to ask you is about your life sciences business.
Due to the license out of the rare obesity drug in itself, I do think that that has provided you with an uplift in terms of your overall profitability for the quarter. Over the short term, do you think that there will be any similar other cases of this nature that you would be able to update us about?
석유화학 제품 미주 쪽 판매 계획에 대해서 말씀드리겠습니다. 당사는 미주 쪽에 폴리올레핀 계열과 가전용 ABS, 그리고 새롭게 생산을 시작한 생분해성 수지인 PBAT, 그리고 태양광 제품인 POE 등 제품을 판매 확대를 하고 있습니다. 특히 ABS 미주 컴파운딩 공장을 상반기에 가동을 함으로써 ABS의 미주 고객들 확대를 추진 중에 있습니다. 당사의 미국, 미주 판매 확대 전략은 중국 의존도를 낮추고 미국을 포함한 고수익 지역으로의 다변화가 목적이고, 그 판매 규모는 각 지역별 수익성에 맞추어서 플렉서블하게 운영할 계획입니다.
So maybe I can address the first question about the overall contribution that we have coming from the American region or the US market in terms of our petrochemicals business. If you look at the products specifically that are performing in the US market, we have the polyolefin and also the ABS that is used for household purposes. In addition to that, in new product areas, we also have the biodegradable PBAT product and also POE that is used for solar energy panels. In addition to that, right now, in the first half of the year in the American region, we also have the compound capacity that will be going online. And as a result of that, we do expect that our overall business presence in the US should increase going forward.
According to the expansion strategy that we have, the overall direction in which we want to move would be to decrease our overall dependency or concentration in the Chinese market and try to diversify outside to other markets such as the US that do provide higher profitability. In terms of the overall size, we will continue to monitor the profitability by region and adjust our balance accordingly in a flexible manner.
두 번째 질문인 추가 라이선스 아웃 관련한 질문에 답변 드리겠습니다. PEB만 치료제 라이선스 아웃 계약과 같이 전략적 파트너십 기회를 지속적으로 모색하여 투자 효율화와 신약 성공 확률을 지속 제고하고자 합니다. 다만 현재까지 추가 라이선스 아웃이 확정된 프로젝트는 없는 상황입니다.
Maybe I can address your second question about additional license out opportunities that we may see on the horizon. With regards to the license out contract that we have for our rare obesity treatment, of course, we continue to try to develop and seek out strategic partnership opportunities and also try to create opportunities that would make our investments more efficient and increase the possibility of success of our new drugs. However, as of now, there are no determined or decided additional license out opportunities or projects that we have in the pipeline.
question is Nikhil Bhandari from Goldman Sachs. Please go ahead with your question.
The next question is from the line of Nikhil Bhandari from Goldman Sachs. Please go ahead.
Yes, hi. Thank you for the opportunity. I had two very quick questions. We heard from LG Energy Solutions in the call today about winning more customers for LFP, both the one recent customer for energy storage battery, but also recently for EV battery. So just want to understand LG Chem's preparation and plans for manufacturing LFP cathodes going forward in order to help with the supply chain of LGES. And the second, I just want to confirm the cathode capacity targets are cut, right? In the previous presentation, I think the capacity guidance for cathode was 280,000 tons for 2026. Now it appears in the PPD it is about 200,000 tons. So just want to confirm there is a meaningful cut here to your guidance for, in particular, the Korea plan for 2026. Am I reading it correct? Just want to confirm. Thank you.
네, 두 개의 짧은 질문을 좀 여쭤보도록 하겠습니다. 첫 번째 질문은 저희가 오전에 LG 엔솔의 실적 발표와 관련돼서 저희가 들었던 소식 중에 하나는 LFP 쪽에 대해서는 의미 있는 어떤 성과들이 있는 것 같습니다. 그래서 물론 ESS용 LFP와 관련돼서도 수주된 부분들이 있지만 전기차 배터리 관련된 LFP에 있어서도 진전이 좀 있는 것 같습니다. 그래서 제가 여쭤보고 싶은 질문은 LG 화학의 측면에서 LG Chem 측면에서 봤었을 때 LG 엔솔의 LFP 공급망을 더 확대해 나가고 또 구축하는 데 있어서 LFP용 양극재 생산과 관련돼서는 어떠한 계획들을 갖고 계시고 어떻게 진행을 하시고자 하는지에 대해서 여쭤보고 싶습니다. 그리고 두 번째는 사실 확인을 좀 한 가지 하고 싶은데요. 양극재 관련된 가이던스가 하향 조정이 된 부분이 맞는 것인지 한 번만 확인을 해 주셨으면 좋겠습니다. 제가 기억이 맞다고 한다면 원래 제공하셨었던 가이던스는 2026년에 280,000 톤 정도 되는 걸로 기억을 합니다만 지금의 PT 자료를 보게 되면 200,000 톤 정도가 되는 것 같습니다. 그래서 의미 있는 하향 조정이 있었다라고 생각이 되는데요?
이게 한국 공장 기준인 것 같기는 합니다만 이 숫자들이 맞는 것인지 한 번 확인을 해 주시면 좋을 것 같습니다.
LFP와 캐파 관련된 답변 드리도록 하겠습니다. 국내 청주의 LFP 양극재 파일럿 라인이 구축이 완료가 돼서 제품 개발은 계획대로 진행이 되고 있고 양산 투자에 대한 타당성을 검토 중에 있습니다. 저희는 기존에 있는 LFP보다는 기존 LFP와는 좀 차별된 개선된 제품을 검토를 진행 중에 있고 LG 엔솔의 ESS용보다는 EV용으로 지금 검토 중에 있고요. 복수의 OEM과 공급 논의를 진행을 하고 있습니다. 기존의 양산 계획을 2026년에서 1년 정도 수년해서 2027년도 양산을 전제로 해서 개발 투자를 검토 중에 있습니다. 캐파 계획 같은 경우는 말씀드렸던 것처럼 2026년 캐파 계획은 280,000톤에서 국내랑 모로코의 투자 계획을 1-2년 수년함으로써 약 200,000톤으로 조정이 되었고요. 조정된 캐파는 글로벌 기준입니다.
So maybe I can address both the questions that you had with regards to the LFP cathodes and also the capacity guidance for cathodes in general. First, to talk about the LFP cathodes. Right now in Cheongju of Korea, we do have a pilot line for LFP production in place, and right now we are focusing on the product development side of things. At the same time, we are currently looking into the feasibility of investing into mass production capabilities. So for the focus of our LFP development, it's not on the traditional LFP products that are available now, but it would be on a more enhanced or upgraded version of the LFP chemistry. And in addition to that, rather than for ESS purposes, we're more focusing on EV LFP capabilities.
As a result of that, right now we are engaging with multiple OEM parties and discussing possibilities of supply. In addition to that, we are pushing back one year the overall plans that we have. Initially, it was 2026. Now it would be 2027 mass production for EVs. Right now that is what we are developing and what we're working on as an overall assumption in terms of our investments and development targets. With regards to your second question about the capacity guidance adjustment, it is that for 2026, the overall capacity for cathodes on a global basis would be adjusted from 280K-200K. This is including the adjustments that we plan in Korea and also pushing back the Moroccan investment by one to two years.
네, 청강 회장 마지막 질문 받도록 하겠습니다. 마지막으로 질문해 주실 분은 모건스탠리의 신용석 님입니다. 질문 부탁드립니다.
Well, they're getting the last question. The last question is from the line of Yongseok Shin from Morgan Stanley. Please go ahead.
예, 질문 기회 주셔서 감사합니다. 저는 한 가지 질문 드리겠습니다. 기존의 매니지먼트께서 말씀 주신 건 회사가 주주 밸류 크리에이션 측면에서 성장에 더 포커스를 두고 계셔서 당분간 주주 환원은 좀 어렵다고 말씀을 주셨는데요. 다만 오늘 중장기 캐파 및 캐펙스 조정을 말씀하셔서 그럼 가지고 계신 자산을 활용한 주주 환원 개선 옵션들은 좀 고려가 되고 있는지 말씀 주시면 감사하겠습니다.
Yes, thank you for the opportunity to ask questions. Actually, I only have one question that I would like to ask you. And that is really regarded to an issue that you had discussed previously. I think that what management had communicated to the market is that in terms of value creation for shareholders, that for the time being, the focus would be on investing into growth and for the future. And as a result of that, more stronger shareholder returns may be a bit difficult. However, you have discussed your intentions over the midterm to adjust some of your capacity and expansion and also CapEx plans. So utilizing the assets that you currently have, would there be any update on your position with regards to your shareholder return intentions?
저희 LG Chem은 성장을 통해서 기업 가치를 높이고 또 주주 가치를 높이는 어떤 기본적인 개념에 대해서는 변함이 없습니다. 지금 저희가 하고 있는 사업들이 지금 현재 굉장히 좀 어려운 상황이기 때문에 이런 부분에 좀 집중해서 저희 경쟁력을 제고하고 또 성장을 할 수 있도록 최선의 노력을 다하도록 하겠습니다.
So I think that at the LG Chem level, of course, growth is a main driver that we believe at the end of the day will enhance the overall firm value of the company and also shareholder value as a whole. So on that stance, I don't believe that there is any change in our position. If you look at the businesses that we're currently engaged upon, we do have very challenging situations. So for the time being, we do want to focus on addressing these difficulties and at the same time doing our best to ensure that we remain competitive and also continue to grow.
네, 이것으로 LG화학 2024년 2분기 실적 발표 컨퍼런스 콜을 모두 마치겠습니다. 추가적인 문의 사항이 있으신 분은 언제든지 IR 팀으로 연락해 주시기 바랍니다. 바쁘신 가운데서 참석해 주신 투자자 여러분들께 감사의 말씀을 드립니다. 감사합니다.
With this, we would like to wrap up our conference call for the second quarter of 2024. Again, thank you for everyone who has taken time to participate on this call. If you have any further questions, please do not hesitate to contact us. Thank you very much.