(Photo= Provided by SK Innovation)

 

[Alpha Biz= Reporter Kim Jisun] The financial burden on domestic companies engaged in related businesses continues amid the ongoing downturn in the petrochemical industry.

On the 9th, NICE Credit Rating held the "2024 Credit Seminar" at the Korea Exchange Conference Hall to diagnose the credit risks of major groups such as SK, LG, Lotte, and Hanwha due to the long-term downturn in the petrochemical industry and the decline in domestic economic activities.

NICE Credit Rating assessed that Korea's petrochemical industry, which has been heavily reliant on exports, is experiencing a decline in its long-term competitiveness due to China's increased self-sufficiency. In particular, it forecasted that structural adjustments would begin, focusing on facilities such as Naphtha Cracking Complexes (NCC), which import all raw materials and have weak cost competitiveness.

While the portion of these products in the domestic industry as a whole is around 30%, it is relatively higher in the business portfolios of Lotte and LG, at 36% and 32%, respectively.

SK, which has a high proportion of cyclical (economically sensitive) industries such as semiconductors and batteries, is expected to face continued financial burdens in the near term.

SK Innovation was highlighted for its financial burden due to the downturn in the battery sector caused by the electric vehicle (EV) cathode and high capital expenditure (CAPEX). However, it was predicted that stable profit generation in the refining and lubricant sectors, pre-IPO fundraising, and external borrowing could help manage the financial requirements. Regarding SKC, considering the poor performance of its chemical sector and the burden of new business investments, the trend of increasing financial burdens was expected to continue.

Regarding SK On's transition to a deficit, a new researcher commented, "As a latecomer, it took time to rapidly increase production capacity (CAPA), resulting in initial operating costs and yield stabilization." They added, "As this stabilizes, positive effects are expected to emerge," and predicted, "With the expansion of orders related to the automotive industry, future performance will improve."

In the case of LG Group, which has seen a significant deterioration in its petrochemical performance recently, it was diagnosed that financial burden management would be necessary due to the planned investment of over 9 trillion won in operating cash flow annually from this year to next year.

Researcher An Soo-jin stated, "LG Group's operating profit decreased from 7.2 trillion won in 2018 to 5.6 trillion won last year, but the group's net borrowings increased from 18.4 trillion won at the end of 2018 to 36.9 trillion won at the end of 2023." She added, "Based on stable profit generation in the electronics and communications sectors and profit enhancement in the battery sector, as well as various capital procurement methods such as rights offerings and asset sales, the level of debt increase will be adjusted."

For Lotte Group, it was forecasted that the overall profit generation would decline due to the poor performance of the petrochemical sector, which played a cash cow role for the group, and that the high debt burden would persist.

Hanwha Group is expected to experience delayed recovery in the petrochemical and solar sectors. However, with increased order backlogs in the defense and shipbuilding sectors, it was anticipated that the overall group performance would be supplemented.

 

 

[ⓒ AlphaBIZ. 무단전재-재배포 금지]