LG Chem announced on November 5 during its Q3 earnings conference call that it will allocate approximately 20% of proceeds from its LG Energy Solution stake sale to shareholder returns through treasury stock buyback and cancellation. CFO Cha Dong-seok stated the company's current stock price is significantly undervalued compared to intrinsic value, making buyback the most effective shareholder return method at this time. The company also forecast cathode material shipment volumes will more than double next year compared to this year, driven by expanded supply to new customers and LG Energy Solution starting in Q3 this year. The remaining 80% of stake sale proceeds will be used for debt repayment and future growth investments, balancing financial health strengthening with strategic expansion.
LG Chem CFO Explains Stock Undervaluation Rationale for Buyback Strategy
CFO Cha Dong-seok explained during the November 5 conference call that LG Chem considers its current stock price significantly undervalued relative to the company's intrinsic value. He stated, "Considering all these factors, paying minimum dividends at this point and using the remaining amount for treasury stock buyback (cancellation) is the most effective method to achieve shareholder returns." The CFO reaffirmed the company's principle of balanced allocation across three areas: future growth investment, financial health strengthening, and shareholder returns. However, he indicated the shareholder return approach will minimize dividend payments while maximizing treasury stock buyback and cancellation. The 20% allocated to shareholder returns will be split between minimal dividends and the buyback program, while the remaining 80% will repay maturing debt and fund necessary investments for future growth.
Cathode Material Shipments Forecast to More Than Double Next Year
LG Chem forecast cathode material shipment volumes will increase more than twofold next year compared to this year. The company explained that despite expanded supply to new customers and LG Energy Solution in the second half of this year, annual shipment volume will fall short of initial year plans due to North American market contraction and some project delays. However, projects that began supply in Q3 this year will scale up in earnest starting next year, driving annual shipment volume to more than double this year's levels. The company noted that if metal raw material price declines continue into next year, revenue growth may be relatively limited despite shipment volume increases.
For lithium iron phosphate (LFP) cathode materials, LG Chem is pursuing commercialization centered on high-density products rather than low-density products where competition with Chinese companies is unavoidable. The company expects high-density LFP demand to materialize in earnest in 2028-2029 and disclosed it is finalizing supply contracts for approximately 40,000 tons. LG Chem plans to build a China-independent supply chain through technology that does not use precursors with high Chinese dependency, and will establish a system to recycle metal raw materials recovered from customers.
Tennessee Cathode Plant Mass Production Scheduled for Q1 Next Year
LG Chem's Tennessee cathode plant is scheduled to enter full-scale mass production starting Q1 next year. The company stated it is currently conducting trial operations at the Tennessee plant and plans to complete preparations for full-scale operation by year-end. However, considering customer Ultium Cells' inventory situation and production plans, actual mass production is expected to begin in earnest from Q1 next year. The company is negotiating medium- to long-term supply volumes and corresponding compensation measures with the customer, targeting agreement by year-end.
LG Chem assessed that the strategic value of local production bases is increasing as uncertainty in the trade environment grows due to U.S. import tariffs and other factors. Accordingly, the company is discussing local supply plans through the Tennessee plant with multiple potential customers beyond existing customer General Motors (GM). The company plans to increase plant utilization rates and expand its customer base through these efforts.
Petrochemical Business Restructuring Decision Targeted by Year-End
LG Chem maintained its goal of completing decision-making on petrochemical business restructuring direction by year-end. The company is currently negotiating details with partner companies and will disclose specific content to the market once finalized. Regarding the petrochemical industry outlook, LG Chem explained that customers are taking cautious attitudes toward inventory buildup due to high oil prices and raw material price volatility. The company forecast that full-scale inventory replenishment demand will emerge from the point when oil prices and logistics costs stabilize and price direction becomes clear.
FAQ
Q: What percentage of LG Energy Solution stake sale proceeds will LG Chem use for shareholder returns?
A: LG Chem announced on November 5 that it will allocate approximately 20% of the LG Energy Solution stake sale proceeds to shareholder returns, primarily through treasury stock buyback and cancellation with minimal dividend payments. The remaining 80% will be used for debt repayment and future growth investments.
Q: How much will LG Chem's cathode material shipments increase next year?
A: LG Chem forecast during its Q3 earnings call on November 5 that cathode material shipment volumes will more than double next year compared to this year, driven by projects that began supply in Q3 this year scaling up in earnest starting next year.
Q: When will LG Chem's Tennessee cathode plant begin mass production?
A: LG Chem stated on November 5 that its Tennessee cathode plant is scheduled to enter full-scale mass production starting Q1 next year, following completion of trial operations and preparations by year-end, with timing also considering customer Ultium Cells' inventory situation and production plans.
