Good afternoon. We'll now start LG Chem's 2024 fourth quarter earnings conference call. This is Kyung-suk Kim, Head of IR at LG Chem. Thank you for taking an interest in LG Chem and taking the time to join us today amidst your busy schedules. We'll begin with a brief overview of the 2024 Q4 earnings performance. Then, our CFO will talk about the 2024 performance review and the strategic direction for 2025. Following that, each business division strategic lead will provide a more detailed explanation of their respective 2025 performance and outlook. Finally, we will have a Q&A session. Please note that the presentations will be interpreted simultaneously, while the Q&A session will be interpreted consecutively. For those with web access, the materials presented during this conference call can be viewed online and are 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, General Lee in charge of company's business planning, Cheol Ho Yang from Petrochemicals, Jung-woon Seo from Advanced Materials, and Sun-shin Cho from Life Sciences. First, an overview of our financial highlights for the quarter. On page three, consolidated Q4 sales and P&L. Q4 sales was KRW 12,337 billion, a slight decrease compared to the previous quarter. Operating loss was KRW 252 billion. The company recorded a net loss of KRW 899 billion. Page four, 2024 full year business performance. The annual sales revenue was, due to the decrease in sales of LG Energy Solution and Advanced Materials, stood at KRW 48,900 billion, a decrease of 11% YoY. Operating profit was KRW 917 billion, a decrease YoY as the sluggish petrochemical market continued and LG Energy Solution's profitability worsened.
Next, page five, consolidated financial status. As of the end of 2024, assets were KRW 93,900 billion, liabilities were around KRW 45,900 billion, and capital was around KRW 48 trillion. The debt ratio recorded a slight increase YoY to 95.6%. Next, performance and outlook by business division. Page six, petrochemical division. 2024 Q4 sales was KRW 4,855 billion, and operating loss was KRW 99 billion. As China's economic recovery remains delayed, we continue to incur losses due to the deterioration of product spreads caused by rising domestic electricity tariffs and the impact of some scheduled maintenance. Next, advanced materials. In 2024 Q4, sales was KRW 1,389 billion, a decrease of 19% QoQ, and operating profit was KRW 48 billion. Battery materials saw a decline in both sales and profitability due to year-end inventory adjustments by customers and falling ASPs.
Meanwhile, despite a sales decline caused by the seasonal off-peak period, electronic and engineering materials maintained solid profitability. Next, life sciences. In Q4, sales was KRW 338 billion, and operating loss was KRW 1 billion. While sales of key products such as diabetes treatment, autoimmune disease treatment, and vaccines increased, a slight loss was recorded due to the product mix and rising marketing costs. Next, PharmHannong. Q4 sales was KRW 165 billion, and operating profit was KRW 9 billion. Sales and profitability both improved due to the expansion of domestic and overseas sales of crop protection products. Lastly, LG Energy Solution. On January 24th, Energy Solution presented their performance in detail during its earnings call. However, we will briefly present its performance here. In Q4, Energy Solution sales was KRW 6,451 billion, and operating loss was KRW 226 billion.
Sales declined due to year-end inventory adjustments by North American customers, postponement of certain ESS projects, and a drop in metal prices. Profitability shifted to a loss due to weak EV demand, impact from the product mix, and one-off costs related to the disposal of obsolete inventory at year-end. This concludes the earnings presentation. Next, we'd like to have the CFO Dong-seok Cha to present the 2024 performance review and key focus areas for 2025.
Good afternoon. I'm Dong-seok Cha, CFO of LG Chem. Thank you for your keen interest and joining our earnings presentation. First, looking back on 2024, it was a year of unprecedented challenges in the business environment, including a global oversupply in the petrochemical sector and a slowdown in EV growth. Despite these dynamic conditions, we have made significant efforts to enhance our differentiated competitiveness within the industry, achieving strong performance and maximizing corporate value. First, we have been improving our business structure by streamlining marginal operations such as aging petrochemical commodity lines and divesting polarizers and polarizer materials.
Second, we have been responding more agilely to market and competitive changes. We have expanded differentiated high-value-added pipelines within each business segment to improve our fundamentals by transitioning into higher profitability business structure. Additionally, we have focused on fostering our three key growth drivers and have achieved meaningful progress in each area. First, in the sustainability business, we have successfully established a JV for HVO, an eco-friendly biofuel, and completed the construction of a demo plant for supercritical chemical recycling, which is a globally leading technology.
In battery materials, we are continuously securing new global customers, have commenced mass production at our cathode material JV in Gumi, and are steadily preparing for our North American investments. In the new drug business, we have further strengthened our oncology portfolio by initiating a phase 3 clinical trial for our head and neck cancer program. Beyond this, we have actively worked to enhance our core business capabilities through rigorous cost reduction initiatives, advanced working capital management, strengthened customer-centric marketing, and improvements in environmental and safety standards to meet global benchmarks. Looking ahead to 2025, driven by the intensification of protectionist policies in major economies and increasing volatility in eco-friendly regulations, we anticipate heightened uncertainty and rapid changes in the business environment. This year, we will continue to turn challenges into opportunities through transformation and bold initiatives, securing a competitive edge within the industry based on our differentiated strength.
As for our key strategic priorities in 2025, first, we will accelerate the restructuring of our business portfolio by preemptively and proactively identifying our strategic options, focusing on high growth and high profitability applications. Second, we will strengthen the foundation of our three key growth drivers, ensuring a clear competitive advantage in each sector through strategic prioritization. In sustainability, we'll concentrate on the aviation fuel sector, a high-growth market driven by clear regulatory frameworks. Also, we will internalize core technologies for chemical recycling and biomaterials to position ourselves for a differentiated competitive edge as the market matures. In battery materials, we will enhance our technological competitiveness not only in our first-mover products, where we hold a strong advantage, but also in cost-effective solutions and next-generation battery materials. Furthermore, we will continue to strengthen our non-China metal sourcing capabilities.
In new drug development, beyond improving the quality of individual projects, we will continuously expand our late-stage oncology pipeline. Third, to sustain our future competitive advantage, we will maximize the efficiency of external collaboration and resources such as open innovation to accelerate the commercialization of R&D projects. Fourth, we will reassess the economic feasibility of all investments from the ground up and optimize resource allocation to enhance our overall financial soundness. Lastly, we will strengthen our commercial excellence capabilities by responding swiftly to changes in customer needs and market dynamics. By leveraging cost and product competitiveness based on customer experience, we'll continue to differentiate ourselves in terms of profitability within the industry. Dear shareholders and investors, despite the challenging market conditions this year, we will do our utmost to minimize short-term earnings volatility while maintaining solid mid-to-long-term growth. We sincerely appreciate your continued support and trust. Thank you.
Next, slide 13, our 2025 business objectives excluding energy solution. As previously disclosed in our earnings guidance, our sales target for this year, excluding energy solution, is set around KRW 26,500 billion. However, the actual sales volume may vary depending on our business operations and the overall market environment. We'll now move on to a more detailed discussion of our performance and outlook by business division. First, Cheol Ho Yang, Head of Strategy for the Petrochemicals Division, will present on the petrochemical division.
Hello. I'm Cheol Ho Yang, Head of Strategy for the Petrochemicals Division. I will present a review of our 2024 performance and discuss our 2025 business outlook and strategic direction. First, review of 2024. The continued market downturn was driven by an oversupply in Northeast Asia from continued capacity expansion and China's sluggish economic recovery despite its stimulus policies.
Also, rising costs due to higher oil and raw material prices along with increased shipping costs caused by geopolitical risk led to a decline in profitability for major products. In response, we undertook bold structural adjustments in our commodity product segments such as SM, EO/EG, while also expanding high-value-added applications such as semiconductor-grade IPA and started operation at our North American ABS compounding plant. Although certain products maintained solid profitability, these efforts were not sufficient to fully overcome the challenging business environment. Next, 2025 business outlook and strategic direction. In 2025, there are some positive factors, including relief from raw material and transportation cost pressures and a stronger exchange rate. However, we also anticipate an increase in global demand uncertainty due to potential tariff policies under the Trump administration, as well as continued capacity expansion in China and the Middle East.
It is thus difficult to have an optimistic outlook on market conditions. Under this backdrop, commodity business will focus on securing structural cost competitiveness, while high-value-added businesses will expand their portfolio to high-value products through increased sales of automotive, ABS, EV, SSBR, semiconductor IPA, and the discovery of new high-value applications. And thus, our strategic focus areas will be, first, strengthening cost competitiveness through structural reorganization of our commodity business. Second, expanding our portfolio to high-value-added products. And third, taking a selective and focused approach to sustainability, prioritizing prudent investment decisions to ensure long-term competitiveness. Thank you. Next, Seo Jung-woon , Head of Strategy for Advanced Materials division, will present on advanced materials business.
Hello. I'm Seo Jung-woon , Head of Strategy for Advanced Materials division. I will present a review of our 2024 performance and discuss our 2025 business outlook and strategic direction. First, our performance review in 2024. In 2024, cathode material shipments increased significantly, particularly to North American customers. However, due to a decline in major metal prices, overall sales decreased compared to the previous year. Despite this, we maintain solid profitability driven by the expansion of high-value differentiated product sales in engineering materials and electronic materials. In 2025, growth in key downstream markets, including EVs, semiconductors, and displays, is expected to slow down. Additionally, global uncertainty in EV policies and continued weakness in metal prices may limit sales growth.
Nevertheless, we will strive to maintain stable profitability through business portfolio optimization and operational efficiency improvements. In cathode materials, in particular, we will optimize production and SEM operations while also accelerating new product development and expanding our customer base. We will now proceed to Life Sciences division with a presentation from Sun-shin Cho, Head of Strategy for Life Sciences division.
Hello. I'm Sun-shin Cho, Head of Strategy for Life Sciences. I'll present a review of our 2024 performance and discuss our 2025 business outlook and strategic direction. In 2024, we achieved KRW 1,334 billion in sales and KRW 110 billion in operating profit driven by continued growth of our core products and an increase in revenue from out-licensing of rare obesity treatment. We grew by 12.7% YoY. Our core businesses, including Zemiglo portfolio, Eutropin, and Eucept, strengthened their market leadership and continued their sales growth. The out-licensing of rare obesity treatment not only boosted sales but also improved profitability. In new drug R&D, we made progress in our proprietary immuno-oncology therapy, which is currently in phase one clinical trial, and we continue to invest in R&D to ensure the timely development of global new drug projects.
In 2025, we expect to achieve an annual sales revenue of around KRW 1.4 trillion driven by strengthening our market position for key domestic products and the expansion of overseas sales. We anticipate continued sales growth in our key therapeutic areas, including diabetes, growth hormone, infertility treatments, and vaccines by leveraging our leadership in target markets. We will accelerate new drug development by efficiently managing clinical projects and enhancing our innovative platform, further strengthening our new drug portfolio. Building on the stable growth of our existing businesses, we will continue strategic investments in global innovative drug development, laying the foundation for our transformation into a global pharmaceutical company. This concludes the 2024 performance review and 2025 outlook for the Life Sciences business division. This concludes our presentations and will now proceed to the Q&A session.
To ensure that as many participants as possible have the opportunity to ask questions, we kindly ask that each person limit their questions to two. If you'd like to ask a question, please press the star key followed by one on your phone. If you wish to cancel your question, please press star key followed by two.
[Foreign language]
The first question is from the line of Dong-jin 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. The first question would be about your cathode business. If you would be able to talk about your first quarter 2025. I do know it's a short term, but still in terms of your outlook for that quarter, and also in terms of the full quarter of, or the full year of 2025 in total, for the cathode business in terms of how much volume you expect, what are your expectations about ASP, and also profitability going forward. In addition to that, Trump 2.0 has started, and with regards to environmental-friendly various policies or executive orders, there seems to be changes taking place there. Also, there is talk about having tariffs being levied on Canadian goods.
So, as a result of these changes that are taking place, how do you think the EV demand going forward would change, and what's the company's stance in terms of how it will address the situation? The second question that I would like to ask you is about your petrochemical business. It does seem to be that the NCC market as a whole is in a challenging situation. However, if you look at the company's performance, I do think that on a relative basis, it has been able to defend its overall profitability. So, if we go into the drivers behind that, what would that be?
And in terms of what types of points of differentiation you do believe that you have in terms of your competitiveness, if you could elaborate about that, that would be appreciated. In addition, it does seem to be that there will continue to be an oversupply situation. So, if you could talk about your outlook for the markets, breaking down by different products, and what the overall guidance level would be for performance going forward, that also would be appreciated.
[Foreign language]
This is Seo Jung-woon from Advanced Materials, and maybe I can take your question in parts because it does seem to be a very long question. So, maybe I can first talk about the first quarter 2025 and full year 25 outlook guidance that we would have in terms of our cathodes business. If you look at the first quarter right now, Trump 2.0 has started, and if you look at the various policies around EV support, it does seem to be that uncertainties are increasing. In addition to that, there's also the possibility that carbon-related regulations on the EV side will also be weakened or lessened. So, we do think that there is an increasing volatility surrounding the global environmentally friendly policies out in the market.
As a result of that, if we look at our OEM customers, they are maintaining a more conservative stance towards their business, and we do believe that as a result of that, up until the first quarter, there will continue to be inventory adjustments that we will be foreseeing. As a result of that, if you look at our overall shipments on a QoQ basis, we do expect that there will be around a 10% decrease, and in terms of the ASP, we do think that it will be flat quarter -over- quarter. However, as we try to optimize our overall operations and also cut back on our fixed costs, we do think that in terms of profitability, we will be able to see an improvement versus the previous quarter.
To talk about the full year of 2025, as the overall downstream market is more uncertain, we do think it will be challenging to see an overall large amount of volume growth. However, we do have new projects in North America, and also we do think that there will be more growth that we will see on our non-captive business. So, as the first quarter is a bit lower, rather the first half of the year is a bit lower, and going into the second half of the year as we see higher performance, overall for the full year, we do think that at a minimum on a YoY basis, that in terms of shipment growth, that we will be able to see a single mid-digit level type of growth.
However, that having been said, in terms of the ASP, because metal prices are expected to remain weak and as a result of that, ASPs will probably fall, we do think that there will be limited growth in terms of our overall top line. For the overall profitability on a YoY basis, again, we do think that we will be able to maintain a mid-single digit level for 2025.
[Foreign language]
In addition, to move on to the second part of your question, which was about Trump 2.0 and the changes that are taking place under the new administration and also changes in EV-related regulations and how that would have an impact on overall EV demand and how we are going to deal with such a situation. As you have mentioned, because of Trump 2.0 and there have been various EV rollbacks on executive orders, there is some concern that that will lead to more slow demand in terms of overall EV demand growth going forward.
However, if you look at our situation this year, focusing on Tesla and GM, there are various new mainstream cars that will be launched and also low-cost trims that will be full-fledged launched by these OEMs. In addition to that, for LG ES, there are new projects that are going to start. So, we do think that in the U.S. market, we will be able to see year-over-year growth. On the short term, there may be some volatility risk to EV demand. However, over the mid to long term, because the U.S. will be taking stronger measures toward China, we do think that as a result of that, for domestic or Korean companies, that there will be more opportunities going forward. So, for the company, in addition to that, in 2026, we are planning to commercially produce from our Tennessee cathode site.
So, we do think that we will be able to have a more flexible stance towards various common tariff-related risks.
[Foreign language]
Maybe I could take your second question about our petrochemical business. You did talk about or ask about what points of differentiation we had in terms of being able to defend our profitability and also in terms of the per-product guidance that we had going forward. As you have mentioned and as you are aware, for all NCC companies right now, it is a challenging situation. However, from the company side, we have tried to minimize our losses as much as possible and have been continuously having a differentiated profile in terms of our profitability within the market. I do believe that this has been possible because of three different drivers.
The first would be that last year on the SM, EG, Naju AA and other types of small-scale non-core intermediate material and also some of the older lines, we did take some action to rationalize them. So, on the low-growth and low-profitability products, that rationalization has led to an improvement in our fundamentals for this business. Secondly, I also believe that the continuous efforts that we have made to try to expand our high-value-added applications such as semiconductor IPAs, automobile-related ABS, and SSBR for EVs has also contributed to the situation.
And thirdly, based upon our very outstanding process technology that we have, we have been able to upgrade our operational capabilities and at the same time also strengthen our global marketing capabilities by building out CS centers in North America and also in Europe. So, we do think that that also has contributed to our points of differentiation. Going forward, we will continue to take very proactive and also aggressive measures to try to upgrade our overall portfolio and also continue to strengthen our R&D competitiveness to ensure that we have an early foothold in future technology. By doing this, we will continue to differentiate ourselves in terms of our competitiveness.
[Foreign language]
And to talk about the second part of your question, which was the overall outlook that we had by different product lines. In 2025, if you look at the overall demand, we do think that the additional capacity that will be coming online for Ethylene will actually be larger than the demand that we see. So, we do think that some of the oversupply situation will continue in 2025.
However, in China, there are very strong measures being taken to try to stimulate consumption, and based upon that, we do think that we can expect a gradual recovery in domestic demand in China. To break down our view by the different product types, first on the PVC side, in India, there are the expectations that BIS will be implemented and therefore for one of our key markets, which is the high-end India market, we do think that there will be some exports that we will be able to see there. In addition to that, we also think that the overall demand for EV charging cable, advanced PVCs will also be very solid. On the ABS side, we do think that there should be some demand, some expectations for China's domestic demand focusing on various home appliances.
And at the same time, we also believe that there will continue to be strong demand for various high-margin applications such as ABS and ASA for automobiles. For HPM, on this side, we do think that in China, focusing on the domestic demand for various automobiles, if you look at the current situation, the utilization for various tire customers continues to maintain a high level. So, we think that there will be high growth that we will be able to see for high-performance SSBR for EVs and also demand for various replacement tires. So, based upon this, if we talk about our overall guidance for this year, we do think that there will be a fall in various material prices, that there will also be less of a burden due to the overseas shipping costs that we see, and also that there will continue to be a strong dollar situation.
So, for our more commodity-type businesses, we will continue with rationalization efforts. At the same time, for new value-added pipelines, this is something that we will continue to expand. And then for new capacity additions that we have for Aerogel or for North American and India ABSs, we will try to stabilize the operations there so that in terms of our overall profitability, that we would be able to see an improvement on a YoY basis.
[Foreign language]
The next question is from the line of Woo-hyung Jo from HSBC. Please go ahead.
[Foreign language]
Thank you for the opportunity to ask questions. I have two questions that I would like to ask you. One is about your cathode business, and one is about your CapEx. So, about the cathode business, as you have mentioned, in the forefront, we do think that there is an increasing uncertainty related to various environmentally friendly policies.
As a result of that, I do understand that for your cathode capacity, that you have been adjusting it downward for this year and next year. Is there a possibility that there will be further downward adjustments reflecting the backdrop that we are currently in? The second question I would like to ask you is about your CapEx. If you look at the CapEx guidance for last year, throughout the year, you continually cut down on the guidance levels and decreased them. For 2025, what would be the guidance there? Over the mid to long term, if you could talk about your guidance numbers, that would be something that we would appreciate.
In addition to that, in terms of funding that CapEx, could you talk about what type of options you are currently reviewing, including the possibility of maybe selling some of the LGES stake that you have? In addition to that, in light of the fact that recently there was a downgrade on your credit rating, and also it does seem to be a very challenging overall backdrop for the company from a larger perspective in terms of your financial position management or overall profile management, how do you want to do that going forward?
[Foreign language]
I can take your first question about our cathode business. Because there is a large uncertainty related to the growth of the downstream market, we are trying to optimize the existing capacity that we have in terms of our overall operations and also improve our utilization. So, the focus would be on trying to increase the overall production efficiencies that we have. And as a result of that, over the mid- to long-term capacity management, we do want to take a more conservative stance.
So, as a result of that, in terms of our overall capacity plans, we have adjusted them from initially being 170,000 tons in 2025 and 200,000 tons in 2026 to 150,000 tons in 2025 and 170,000 tons in 2026. So, we are pushing back some of our plans. In the case of our U.S. Tennessee site, as we had initially planned, excuse me, we will start commercial production in the second half of 2026, after which we will continue to expand or add on additional capacity. However, in terms of new capacity investments, including investments in any LFP capacity, we will take into consideration the overall dynamics, including demand and also the competitive landscape, to be more flexible in terms of how we put forth our strategy going forward.
[Foreign language]
Maybe I can address your next question, which was about our 2025 CapEx and also our mid- to long-term CapEx expectations and how we are going to engage upon managing our financial profile. First to talk about 2024, as you have mentioned, we did continue to lower our guidance level, and this was because we were trying to be more strict in terms of our CapEx execution. Versus the initial plans that we have, we had ended up with a significantly lower actual CapEx level. For 2024 as a whole, we ended up spending around KRW 2.3 trillion. In 2025, if you look at the downstream market situation and also the uncertainties related to demand, taking into consideration these situations, we do think that we do want to maintain our overall stance that we had in 2024.
As a result of that, it's difficult to pinpoint a number, but we do think that the overall CapEx will be at the upper end of KRW 2 trillion. In addition, specifically to talk about our investments related to cathodes, we are looking at the plans that LGES has and other OEMs have in terms of the actual volume that they are planning, and as a result of that, also looking at the commercial production timing for each of our lines. Right now, we are trying to put priority on utilizing the existing already invested CapEx that we have and trying to refrain from making any new investments as much as possible.
In addition, for our sustainability business, because the overall market ripening is taking place slower than what we had expected, we are going to very cautiously and also selectively invest resources in only areas in which we actually believe growth is already in place. So that would be the plan there. And over the mid to long term, versus the previous plans that we shared with you of having CapEx of around KRW 4 trillion, we are in the process right now of adjusting those plans. So we do think that it would be more down to the KRW 2 trillion-KRW 3 trillion level. So right now, we are expecting to readjust our mid to long-term plan.
[Foreign language]
Next, maybe to talk about our overall funding plans and also our financial management plans that we have.
As the sluggishness within the economy continues and also the sluggishness that we see within the petrochemical industry continue, that is a challenging backdrop. Added to that, on the investment side, we do still have some large CapEx requirements that need to be made. As a result of that, if we talk about our cash flow management stance in general, from the top management level, we do have a very clear recognition that right now, in terms of our business management priorities, the top priority as of now would be on our cash flow management. As of last year, from last year, on a cash flow basis, based upon the initial business plan that we had had, we did foresee that there could be a negative cash flow of around maybe KRW 2 trillion.
However, we took various initiatives to try to cut back on our CapEx, also do some readjustments of our marginal businesses such as the polarizer plate business, and also increase the overall efficiencies of the asset that we have and cut back on our working capital. So, as a result, for the year, we were able to generate a positive cash flow. And as a result of that, if you look at 2024, in terms of the borrowings that we had, we were able to maintain it at the same level as 2023. For this year, again, if we just look at our business plan, the business plan in itself does represent a slight negative cash flow that we have.
However, as we did last year, we will continue to engage upon various initiatives on top of our business plan, such as looking deeply into the priority that we have for various investments, to redefine it as much as possible and cut back on investments in areas that are possible. Also, adjusting our portfolio and businesses that we want to put in and put out so that the overall portfolio is realigned and also continue on efforts to try to increase the efficiencies that we have on our assets so that once again this year we can create a positive cash flow situation and maintain that. So, this is an effort that we will continue.
[Foreign language]
The next question is from the line of Jeon Woo-jae from KB Securities. Please go ahead.
[Foreign language]
So, 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 the end of last year at the government side, there was an announcement on measures that the government would be taking to strengthen the competitiveness of the petrochemical industry. So, what are your expectations about these plans and what changes do you actually foresee within the industry?
And in addition to that, if there are areas that the company will be participating, so for example, upstream restructuring or any areas specifically within your portfolio that you would like to be emphasizing, especially on the high value-added new material side, what would that be? The second question that I would like to ask you is about your year-over-year net profits. It does seem to be that it has come down dramatically. So, on the non-operating side, if there are any one-off factors that we should be aware of, what would that be?
[Foreign language]
So, maybe I can take your question about the government's plans that were announced at the end of last year, what our expectations are for changes within the industry, and how we are going to participate if at all going forward, and also what changes we are foreseeing or what emphasis we will have in terms of our high value-added new materials portfolio.
According to the government's plans that were released at the end of last year, if there is voluntary restructuring between different companies, there would be various incentives that would be provided, and at the same time, for new growth and high value-added areas, there are tax benefits for R&D that would be conducted in those areas. There are some areas in which we can look forward to. However, if you look at the eligibility for that, large conglomerates have been excluded as the eligible parties for such benefits. In terms of the items which would actually have an impact on our profitability, there's not many that would have an impact. At the end of the day, from a profitability standpoint, we think that any real tangible effects would be limited from the announcements that have been made.
However, that having been said, in the first half of 2025, the government is planning to come out with additional measures. So, we will continue to discuss and communicate with the government so that we can be included in terms of the eligibility for certain items. However, separate from the government-led initiatives right now, to ensure that we are able to maintain our competitiveness in the downstream market, on the upstream side, we do have various strategic options such as JVs that we are currently looking at, and this would be something that we would be pursuing as a self-help measure. In addition, if we look at our premium product lines, which we define to be products that can generate a profitability of more than 10% regardless of the market backdrop, we would define these are areas in which we want to continue to very massively grow going forward.
This would be some high margin applications on the ABS, HPM, and advanced PVC side. In addition to that, also C3, IPAs for semiconductors would also be part of this portfolio. This is an area in which, again, we want to be able to significantly increase our top line going forward. On the new material side, right now, there are various efforts that are ongoing. As we have mentioned before, we do have the overall aerogel commercial production that we are planning to prevent any thermal runaways for batteries. In addition to that, there's also the supercritical water for a hydrothermal plastic recycling test plant that we are planning.
And at the same time, there are various other materials such as 3HP that can be used in various functional cosmetics and also bio-nylon that we are currently planning to develop for various global fashion brands.
[Foreign language]
So, this is planning and coordination, and maybe I can talk about the non-operating items that had an impact on our overall net income. So, if we look at the overall losses that we have seen in the fourth quarter, it was in total around KRW 900 billion on the non-operating side.
If we break that down by the various line items, I think that they can be grouped into the interest expenses, the impairment losses that we have had on tangible and intangible assets, and also some of the effects translation losses that we recognized in the quarter. First, in terms of our interest expenses, if you look at the full year of 2024, it was KRW 600 billion. In the fourth quarter, we recognized around KRW 200 billion of that. In terms of the impairment losses, because there was a decline in the future cash flow value from our separator and AVEO business, there was around KRW 400 billion in impairment losses that we recognized on intangible assets.
In the case of our separator business, because of the slowdown in the industry going forward and also because there continues to be a very strong competition surrounding ASPs, right now we are in a situation in which we are looking back at the capacity additions from the current Hungary JV from the beginning or re-reviewing the whole project. At the same time, we're looking at areas on how to strengthen the business competitiveness of this area. In addition to that, on the AVEO side of the new drug development projects that we had had, the combination therapy using Fotivda and Opdivo to create a second line treatment for renal cancer did not generate any meaningful results, and thus the project was dropped, which led to impairment losses that we recognized.
However, based upon the clinical trial data that we have been able to garner, we will continue to research to develop a monotherapy second line treatment. And in addition, we will continue to strengthen our AVEO-based cancer treatment portfolio by starting phase three clinical trials for head and neck cancer and conduct phase one trials for immunotherapy and cancer cachexia. And in addition to that, on the effects-related translation losses side, this was due to the surge that we saw in the strong dollar and the effects of that.
[Foreign language]
We will be getting the last question. The last question is from the line of Parsley Ong from J.P. Morgan. Please go ahead.
Hi, this is Parsley. Thank you for the chance to ask the last question. This is a follow-up to the previous one on dividends. So, LG Chem has announced a DPS of KRW 1,000 even though your EPS was negative. Can you share with us the background behind deciding to issue a dividend this time? I think earlier you mentioned that you predicted the negative cash flow and therefore you did various ways to improve your cash flow. So, is this an attitude we can expect going forward? Were there other things that contributed to your decision? For example, you're expecting a more positive cash flow outlook over the next few years? And just generally, your thought process behind dividend and improving the hold co discount. Thank you.
[Foreign language]
[Foreign language]
Yes, with regards to our overall dividend policy, maybe I can address the question. This is the Head of IR. If you look at our consolidated financial statements based upon that and if you exclude the one-off items that we have seen in terms of our overall operations, the overall basic stance that we have of a company would be to dividend out 20% of the net income of our controlling shareholder portion.
So, in 2024, based upon this principle, because of the market environment, in actuality, there were no resources to actually dividend out according to this principle. However, in light of the overall stance that we want to maintain for enhancing shareholder return and also maintaining our firm value, the company still maintained a decision to have dividends of KRW 1,001 for common stock and KRW 1,051 for preferred shares. For your reference, by modifying our articles of incorporation on March 25th of 2024, we have been able to improve our overall dividend process method. And for the dividends that we have decided this time around, the record date will be March 31st, and dividends will take place thereafter. So, please take this into consideration. And with regards to our basic stance towards the holding company discount issue, I don't think that there's any change in that.
[Foreign language]
So, with this, we would like to wrap up our earnings conference call for LG Chem. For those of you who did not get an opportunity to ask a question or may have additional questions, please do not hesitate to contact our IR team. And we would like to thank everyone again for taking time out of your busy schedule to participate on this call. Thank you.