LGES investment activity boosted by positive cash flow Battery maker is in virtuous cycle of investments and cash generation

Translated by Ryu Ho-joung 공개 2021-07-29 07:52:59

이 기사는 2021년 07월 29일 07:51 더벨 유료페이지에 표출된 기사입니다.

LG Energy Solution (LGES)’s aggressive investment strategy is gaining traction thanks to positive cash flow as the South Korean battery maker continues to pour a huge amount of money into the race to dominate the rapidly growing electric vehicle battery market.

LGES, which was split off from LG Chem last year, generated 474.5 billion won ($411.1 million) in operating cash flow in the first quarter of this year. The operating cash flow after interest and taxes stood at 423.6 billion won.

LGES is the only South Korean battery maker that is in a virtuous cycle of investments and cash generation. Cash generated from operating activities is used for investments and also enhances the company’s ability to finance future capital expenditures by improving its financial position.

As the competition to grab a bigger slice in the electric vehicle battery market intensifies, battery makers are spending billions of dollars each year to increase production capacity. This results in negative free cash flow and makes their financial position weak.

LGES’s positive operating cash flow contrasts with rival SK Innovation whose battery business is still unprofitable and is also likely to have negative net cash flow. It’s not easy to extract cash flow from SK Innovation’s battery business as the company’s business portfolio includes chemicals and energy apart from battery production.

Increased borrowing in the first quarter as well as cash generation helped raise LGES’s liquidity. Its consolidated cash and cash equivalents increased by nearly 62% to 2.4 trillion won at the end of March this year from 1.49 trillion won at the end of 2020.

This led to improvement in the company’s financial position. Debt ratio reduced to 153.1% at the end of March on a consolidated basis, compared to 163.6% at the end of 2020. Net debt declined from 4.67 trillion won to 3.81 trillion won in the same period.

The company is also looking to raise billions of dollars in its initial public offering, which is expected to occur before the end of this year.

LGES’s liquidity will be further enhanced by cash to be paid by SK Innovation. The two companies in April agreed to settle their battery dispute. SK Innovation will pay LGES 1 trillion won in lump-sum payments and another 1 trillion won in royalties.

In April, LGES contributed about 1.1 trillion won to Ultinum Cells, an electric vehicle battery joint venture with General Motors. Additionally, it plans to invest more than 5 trillion won in battery cell production by 2025 to increase its US production capacity to 145 gigawatt hours. This is enough cells to produce more than two million pure electric vehicles per year. (Reporting by Ki-soo Park)
< 저작권자 ⓒ 자본시장 미디어 'thebell', 무단 전재 및 재배포 금지 >

더벨 서비스 문의


유료 서비스 안내
주)더벨 주소서울특별시 중구 무교로 6 (을지로 1가) 금세기빌딩 5층대표/발행인성화용 편집인이진우 등록번호서울아00483
등록년월일2007.12.27 / 제호 : 더벨(thebell) 발행년월일2007.12.30청소년보호관리책임자김용관
문의TEL : 02-724-4100 / FAX : 02-724-4109서비스 문의 및 PC 초기화TEL : 02-724-4102기술 및 장애문의TEL : 02-724-4159

더벨의 모든 기사(콘텐트)는 저작권법의 보호를 받으며, 무단 전재 및 복사와 배포 등을 금지합니다.

copyright ⓒ thebell all rights reserved.