LG Chem (051910.KS) — FY2025 Financial Analysis
"Energy Solution lifts ₩1.18 trillion in operating profit, but controlling-stake net loss balloons to ₩1.82 trillion"
Source: Annual Business Report — Filed March 13, 2026 with DART | Consolidated Financial Statements | Unit: KRW billions
LG Chem closed FY2025 with consolidated revenue of ₩45.93 trillion, down 5.7% year-over-year, while operating profit climbed 35.0% to ₩1.18 trillion. Beneath that headline, however, the entire ₩1.18 trillion in group operating profit rests on the ₩1.35 trillion contributed by subsidiary LG Energy Solution — a structural dependency that turns the parent's chemicals and materials operations into a net drag. Net income attributable to controlling shareholders deepened to a loss of ₩1.82 trillion from ₩690.9 billion the prior year, while consolidated borrowings expanded by ₩6.44 trillion, lifting total liabilities by 17.6%. Against this loss, the company doubled its common dividend per share from ₩1,000 to ₩2,000, signalling that the "three new growth engines" portfolio reshuffle has become the dominant capital-allocation story.
Balance Sheet
Asset composition: the ₩100 trillion threshold and the meaning of ₩4 trillion in assets-held-for-sale
| Item | FY2024 | FY2025 | YoY | Comment |
|---|---|---|---|---|
| Cash and equivalents | 7,854.9 | 9,899.9 | +26.0% | Borrowing-led liquidity buffer |
| Trade receivables (current) | 8,166.0 | 6,724.7 | −17.7% | Lower sales and tighter collection |
| Inventories | 8,847.4 | 8,177.3 | −7.6% | Metal-price decline in valuation |
| Assets held for sale | 0.0 | 3,996.4 | n.m. | Water Solutions and others reclassified |
| Property, plant and equipment | 54,570.4 | 56,458.2 | +3.5% | Battery and cathode capex accumulating |
| Intangible assets | 3,619.4 | 3,501.8 | −3.2% | Amortisation outpaces additions |
| Total assets | 93,857.8 | 101,061.7 | +7.7% | Crosses ₩100 trillion |
The most striking change in the asset base is the assets-held-for-sale line. After hovering near zero (₩74 million) in the prior year, this item exploded to ₩3,996.4 billion in FY2025. The driver is a sequence of divestitures the company resolved during 2025: Water Solutions (RO membranes) was reclassified to discontinued operations in June at a transfer price of ₩1.4 trillion and the deal closed in December; the residual stake in LG Chem Hungary Battery Separator Kft. was acquired before the company resolved in October to sell its substrate-separator business; and the Aesthetics arm of the Life Sciences division was approved for sale in August at a transfer price of ₩200.0 billion.
Trade receivables fell from ₩8,166.0 billion to ₩6,724.7 billion, a ₩1,441.3 billion drop. The 17.7% decline runs three times deeper than the 5.7% revenue contraction, reflecting both shorter collection cycles and the reclassification of certain businesses into assets-held-for-sale. Inventories declined ₩670.1 billion to ₩8,177.3 billion as falling metal prices fed through to valuation, particularly in petrochemicals and battery materials. Property, plant and equipment, by contrast, rose ₩1,887.8 billion to ₩56,458.2 billion — a direct readout of LG Energy Solution's global capacity build-out and Advanced Materials' US cathode plant capitalising onto the asset base.
Debt structure: ₩33.81 trillion in borrowings, ₩6.44 trillion added in a single year
| Liability | FY2024 | FY2025 | YoY |
|---|---|---|---|
| Trade payables (operating) | 3,681.9 | 3,536.5 | −3.9% |
| Other payables (operating) | 7,024.3 | 6,982.5 | −0.6% |
| Borrowings (current) | 7,621.1 | 11,738.1 | +54.0% |
| Borrowings (non-current) | 19,755.0 | 22,073.8 | +11.7% |
| Total borrowings (financial) | 27,376.1 | 33,812.0 | +23.5% |
| Total liabilities | 45,862.3 | 53,956.1 | +17.6% |
The debt mix points unambiguously to one conclusion: operating liabilities are flat, financial liabilities are expanding. Trade payables and other operating payables — the natural by-products of running the business — barely moved. Financial borrowings, however, jumped from ₩27.38 trillion to ₩33.81 trillion, an addition of ₩6.44 trillion. The current portion alone surged 54.0%, from ₩7.62 trillion to ₩11.74 trillion, raising visible refinancing pressure in the short-term funding market over the coming twelve months. Management itself flagged the dynamic in the directors' management diagnosis, attributing the ₩6.44 trillion increase directly to ongoing investment in LG Energy Solution and the parent's Advanced Materials US cathode plant.
Interest payments echo the same trend. Cash interest paid in the operating cash flow statement rose 32.9% from ₩939.3 billion to ₩1,248.4 billion, the joint product of larger balances and the global high-rate environment.
Capital quality: accumulated losses eat into retained earnings
| Equity item | FY2024 | FY2025 | Δ |
|---|---|---|---|
| Paid-in capital | 391.4 | 391.4 | 0 |
| Capital surplus | 11,568.9 | 12,654.0 | +1,085.1 |
| Accumulated OCI | 2,751.3 | 2,820.5 | +69.2 |
| Retained earnings | 18,592.2 | 16,999.3 | −1,592.9 |
| Equity attributable to owners of parent | 33,284.2 | 32,845.6 | −438.6 |
| Non-controlling interests | 14,711.3 | 14,259.9 | −451.3 |
| Total equity | 47,995.5 | 47,105.5 | −889.9 |
Paid-in capital remained unchanged at ₩391.4 billion, including ₩38.4 billion in preferred-share capital. Retained earnings, however, fell ₩1,592.9 billion to ₩16,999.3 billion as the ₩1.82 trillion controlling-shareholder loss flowed straight onto the balance sheet. Equity attributable to owners of the parent therefore slipped from ₩33,284.2 billion to ₩32,845.6 billion, a ₩438.6 billion decline. The ₩1,085.1 billion increase in capital surplus most plausibly reflects non-controlling-interest equity transactions tied to LG Energy Solution, but it could not offset the retained-earnings drawdown — total equity ended ₩889.9 billion lower at ₩47,105.5 billion. The ₩451.3 billion drop in non-controlling interests is consistent with shifts in external shareholder positions in subsidiaries, LG Energy Solution among them.
Income Statement
Core metrics: revenue down, operating profit up
| Item | FY2024 | FY2025 | YoY |
|---|---|---|---|
| Revenue (operating revenue) | 48,699.8 | 45,932.2 | −5.7% |
| Cost of goods sold | (41,247.5) | (38,122.7) | −7.6% |
| Gross profit | 7,452.3 | 7,809.5 | +4.8% |
| SG&A | (8,057.4) | (8,275.4) | +2.7% |
| Operating profit | 874.9 | 1,180.9 | +35.0% |
| Operating margin | 1.80% | 2.57% | +0.77pp |
| Net income | 515.0 | (977.1) | Swings to loss |
| Net income to controlling shareholders | (690.9) | (1,819.4) | Loss widens |
The headline combination — a 5.7% revenue decline alongside a 35.0% operating profit increase — is unusual on its face. Revenue fell ₩2,767.6 billion to ₩45,932.2 billion, but cost of goods sold dropped 7.6%, compressing the COGS ratio from 84.7% to 83.0%, a 1.7 percentage point improvement. Gross profit therefore expanded 4.8% to ₩7,809.5 billion despite the smaller top line. Management's framing is that "despite the petrochemical downturn, the battery business operated a profitability-led product mix and stable North American sales lifted IRA subsidy receipts, driving the 35.0% gain."
The deeper story is that the entire ₩1,180.9 billion in operating profit hinges on LG Energy Solution's ₩1,346.1 billion. The segment table makes the point unmistakably:
| Segment | FY2025 Revenue | YoY | FY2025 Op. profit | YoY |
|---|---|---|---|---|
| Petrochemicals | 17,568.3 | −5.7% | (356.4) | Loss deepened |
| Advanced Materials | 2,638.5 | +8.9% | 146.4 | −66.5% |
| Life Sciences | 1,345.4 | +6.0% | 127.6 | +15.7% |
| LG Energy Solution | 23,661.3 | −7.6% | 1,346.1 | +134.0% |
| Corporate / Other | 718.6 | −5.6% | (82.8) | Loss narrowed |
| Total | 45,932.2 | −5.7% | 1,180.9 | +35.0% |
The Petrochemicals operating loss widened from ₩104.2 billion to ₩356.4 billion, a 242.1% deepening. Management cites "persistent oversupply led by China across the Northeast Asian region and demand stagnation from the global slowdown." Advanced Materials' operating profit contracted 66.5% from ₩436.7 billion to ₩146.4 billion, with the swing factors being the abolition of US EV consumer subsidies — which throttled cathode shipments — and the negative lagging effect of continuously falling metal prices. LG Energy Solution moved in the opposite direction: backed by widening Advanced Manufacturing Production Credit (AMPC) receipts under the IRA, operating profit more than doubled from ₩575.4 billion to ₩1,346.1 billion. The chemicals and materials businesses at the parent are being plugged by the battery subsidiary.
Why operating-profit growth did not flow through to net income
The decisive line is "other non-operating expenses," which jumped from ₩1,957.0 billion to ₩4,103.1 billion, an addition of ₩2,146.1 billion. Even after netting against ₩1,473.7 billion in other non-operating income, the non-operating loss widened materially. Add the negative gap between ₩1,944.7 billion in finance income and ₩2,158.3 billion in finance costs, and pre-tax loss reached ₩1,780.4 billion. Discontinued operations contributed ₩819.4 billion in income, narrowing consolidated net loss to ₩977.1 billion — most of that gain flowed from the ₩873.7 billion valuation gain on the Water Solutions disposal.
Fixed-cost and R&D burden: research spend at 5.2% of revenue
Selling, general and administrative expenses rose ₩218.0 billion (2.7%) to ₩8,275.4 billion. With revenue contracting, the SG&A ratio climbed 1.5 percentage points from 16.5% to 18.0%. The dominant component within SG&A is research and development. Consolidated R&D spend rose 9.2% from ₩2,190.3 billion to ₩2,391.5 billion, taking the R&D-to-revenue ratio from 4.5% to 5.2% — a 0.7 percentage point increase achieved against a flat-to-declining top line. Management states that R&D is concentrated on the three new growth pillars: high-value/sustainability petrochemicals, battery and electronics materials, and oncology drug development.
The patent portfolio reinforces the R&D intensity. LG Chem on a parent-only basis holds 12,593 domestic and 24,658 international registered patents. Subsidiary LG Energy Solution holds 12,942 domestic and 38,464 international registered patents, plus 14,151 domestic and 24,547 international applications pending. Measured by international registrations alone, the battery IP pool is roughly 1.5 times the size of the parent chemicals pool — a quiet indicator of where the group's intangible-asset center of gravity has shifted.
Cash Flow
| Item | FY2024 | FY2025 | Δ |
|---|---|---|---|
| Cash from operating activities | 7,012.3 | 8,233.9 | +17.4% |
| Cash from investing activities | (13,663.4) | (12,470.6) | +1,192.8 |
| Cash from financing activities | 4,821.3 | 6,243.0 | +1,421.7 |
| Year-end cash and equivalents | 7,854.9 | 9,899.9 | +2,045.0 |
Operating cash flow of ₩8,233.9 billion came in roughly seven times operating profit of ₩1,180.9 billion — a function of substantial non-cash charges, principally depreciation, plus favourable working-capital releases. The detailed reconciliation shows ₩9,924.2 billion in cash generated from operations, less ₩1,248.4 billion in interest paid and ₩759.7 billion in income taxes, arriving at ₩8,233.9 billion in operating cash flow.
Free cash flow remains structurally negative
Investing activities are still dominated by capex on property, plant and equipment, which absorbed ₩13,660.7 billion. That is roughly ₩950.0 billion lower than the prior year's ₩14,614.9 billion, but still well in excess of operating cash flow. The mechanical free cash flow calculation (operating cash flow minus capex) lands at negative ₩5,426.9 billion. Last year's figure was negative ₩7,602.6 billion — the deficit is narrowing, but the company remains structurally dependent on external financing. Cash inflows from loss of control of subsidiaries (₩1,532.6 billion) and government grants (₩154.6 billion) cushioned a portion of the investing outflow.
Financing flows feature a striking two-way movement
Borrowings drawn of ₩23,576.1 billion offset by ₩18,198.3 billion in repayments speak to active rolling and extension of the debt stack. Layered on top, ₩1,933.5 billion in non-controlling-interest contributions and a further ₩1,998.1 billion in non-controlling-interest increases produced a net financing inflow of ₩6,243.0 billion. Dividends paid in the cash flow statement fell to ₩226.6 billion from ₩367.3 billion the prior year, the decline tied chiefly to the change in dividend record date (the introduction of board-resolution-based record dates created an accounting timing gap). The separately disclosed dividend-declared amount tells a different story: ₩141.2 billion on common shares and ₩15.8 billion on preferred shares, totalling ₩156.9 billion — roughly double the prior year's ₩78.7 billion.
Key Findings
Portfolio reshuffle into the three new growth pillars is happening on multiple fronts simultaneously. During 2025 alone, the company resolved on the sale of Water Solutions (₩1.4 trillion transfer price, closed December), the Aesthetics business (₩200.0 billion transfer price), and the substrate-separator business in succession. This continues a sequence that began with the 2023 divestitures of polarising-plate and polariser-material businesses (USD 200 million and RMB 4.5 billion respectively) and Pamhannong's sulfuric-acid and steam businesses in July 2024. The three pillars management is consolidating around are (i) high-value-add and sustainability-driven petrochemicals, (ii) battery and electronics materials, and (iii) oncology drug development built on AVEO. Cash from non-core disposals is flowing into US cathode capex and oncology R&D.
Single-name dependence on LG Energy Solution is hardening into structure. In segment-level asset allocation, LG Energy Solution accounts for 66.4% of group assets (₩67,148.0 billion), 51.5% of revenue, and 114.0% of operating profit. The above-100% share of operating profit is a direct consequence of other segments (Petrochemicals and Corporate/Other) running at operating losses. LG Energy Solution's standalone revenue actually fell 7.6% to ₩23,661.3 billion as metal prices unwound, but IRA Advanced Manufacturing credits drove operating profit to ₩1,346.1 billion. Any material shift in IRA policy — whether outright change or countervailing-duty action — would land directly on LG Energy Solution's operating profit, and from there on consolidated LG Chem profitability, with very little buffer beneath it.
Product warranty provisions are creeping higher to absorb LG Energy Solution ESS and EV recall costs. Notes to the consolidated statements show LG Energy Solution's warranty provision at ₩1,904.5 billion (from ₩1,693.9 billion), a ₩210.6 billion increase. Of that balance, ₩1,549.9 billion (from ₩1,204.8 billion) is the estimate based on warranty period and historical claim experience rate. The principal variables are field-replacement costs for ESS units and replacement costs from voluntary EV-battery recalls. While not a fixed-cost item, additional claim frequency could exert further pressure on operating profit.
Borrowings versus equity have become uncomfortable. The simple borrowings-to-equity ratio — ₩33,812.0 billion in total debt over ₩47,105.5 billion in equity — sits at 71.8%, up 14.8 percentage points from 57.0% (₩27,376.1 billion / ₩47,995.5 billion) a year ago. The total liabilities-to-equity ratio rose from 95.6% to 114.5%, an 18.9 percentage point increase. Domestic credit agencies — Korea Investors Service, NICE Investors Service, and Korea Ratings — continue to assign AA+ to corporate bonds, but Moody's downgraded the company's senior debt to Baa2 in an unscheduled review on November 17, 2025, and S&P assigned BBB ratings in two separate actions in March and May 2025. Global agencies have settled noticeably below the domestic equivalents.
The dividend was doubled despite the loss. The common-share dividend rose from ₩1,000 to ₩2,000 per share, while the preferred-share dividend went from ₩1,050 to ₩2,050 — both nearly doubling. Total dividends declared rose 99.5% from ₩78.7 billion to ₩156.9 billion. With controlling-shareholder net loss at ₩1.82 trillion, the dividend payout ratio is mathematically meaningless (the official disclosure shows 0.0000). Lifting the payout in a loss year reads as a balance between the cash-flow needs of largest shareholder LG Corp. (34.95% of common shares) and a continuing return-to-shareholders commitment to general investors.
Outlook
LG Chem's FY2025 result distils into three concurrent moves: revenue contraction, operating-profit recovery, and a deepening controlling-shareholder loss. Revenue of ₩45,932.2 billion and operating profit of ₩1,180.9 billion translate to roughly a 2.6% operating margin, a level management itself describes as still in recovery. The profit improvement is a function of LG Energy Solution's expanding IRA receipts and product-mix discipline — not a sign that the parent's Petrochemicals or Advanced Materials businesses have regained organic earnings power.
On the constructive side, operating cash flow rose 17.4% to ₩8,233.9 billion. The non-core disposal sequence — Water Solutions, Aesthetics, the substrate separator — is visibly redirecting capital toward the three new growth pillars. R&D intensity climbed to a record 5.2% of revenue. The doubling of the common-share dividend telegraphs a clear shareholder-return commitment.
On the risk side, borrowings of ₩33,812.0 billion (up ₩6,436.0 billion in twelve months) push the liabilities-to-equity ratio to 114.5%. More than 100% of consolidated operating profit derives from a single subsidiary, which makes IRA policy change a binary risk to the entire group's earnings. Petrochemicals' operating loss widened from ₩104.2 billion to ₩356.4 billion, and the China-led oversupply that drives it is structural rather than cyclical and unlikely to clear quickly. Warranty provisions tied to ESS and EV recalls are accumulating. The Moody's downgrade to Baa2 sits at the edge of investment grade.
Distilled, FY2025 is the year LG Chem implicitly accepted its dependence on the energy-solution subsidiary while accelerating the speed of restructuring at the parent. The path beyond 2026 will turn on four levers: narrowing the petrochemical loss, normalising North American cathode shipments at Advanced Materials, generating visible revenue contribution from the AVEO oncology pipeline, and stabilising the borrowings-to-equity ratio.
Disclaimer
This report is prepared for informational purposes based on LG Chem's 25th Annual Business Report filed with DART on March 13, 2026, covering the fiscal year January 1, 2025 to December 31, 2025, and is not an investment recommendation. All figures are on a consolidated basis and may differ from the corresponding separate (parent-only) financial statements. All investment decisions and their consequences rest entirely with the reader.
