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LX Hausys may not sell automotive business amid improving performance Division sharply narrows loss this year

Translated by Kim So-in 공개 2021-08-04 08:06:12

이 기사는 2021년 08월 04일 08:04 더벨 유료페이지에 표출된 기사입니다.

Market insiders are paying attention to whether the automotive and industrial film business of LX Hausys, formerly known as LG Hausys, will be put up for sale again amid improving financial performance this year.

LX Hausys’s automotive and industrial film business recorded an operating loss of 1.8 billion won ($1.56 million) in the second quarter of this year, according to industry sources Monday. The division sharply narrowed its loss from 20 billion won in the second quarter of 2020. In the first half of this year, the division posted an operating loss of 5 billion won. It is expected to narrow its loss this year, given that its operating loss amounted to 45.3 billion won in 2020.

LX Hausys was established in 2009 through spin-off of industrial materials segment from LG Chem. The company’s building and interior business accounts for 70% of its revenue. After the automotive and industrial film division swung to a loss in 2018, the division has been eroding the overall profit.

The automotive and industrial film division recorded a loss of 8.8 billion won in 2018, 21.8 billion won in 2019 and 45.3 billion won in 2020. Excluding this division, LX Hausys’ operating profit margin, which is in a 1-3% range, jumps to a 5-6% range.

This year, however, revenue from automotive materials grew as the sales of vehicles increased, and revenue from films used for home appliances also increased thanks to the global market recovery.

Some market insiders note the company may have withdrawn its plan to sell the division as its earnings have improved significantly. The company hasn’t made any move to sell the division again after the sale was canceled at the end of March.

LX Hausys is currently affiliated with the LX Group instead of LG group, which strengthens views that the division will remain in the group.

One of the reasons the industry sources had predicted the sale of the division is the necessity to improve LX Hausys’ financial structure. But its financial structure has started to improve recently, with its debt ratio down 2.1% points to 182.8% in the second quarter compared to the end of 2020. Its debt to assets ratio was 95.7%, down 13.8% points in six months, and its net debt to assets ratio was 62.7%, down 8.1%.

The company’s effort to reduce interest expenses after changing its debt structure has helped it improve its financial structure. LX Hausys’ debt decreased by 93.2 billion won to 823.9 billion won in the second quarter compared to the end of 2020, thanks to a decrease in long-term borrowings from 515.3 billion won to 291.3 billion won.

The interest burden has long been considered as LX Hausys’s weakness. It had to pay 37.2 billion won as interest expense while it generated an operating profit of 68.8 billion won in 2019. It also paid 29.9 billion won as interest expense out of an operating profit of 70.9 billion won in 2020.

The company’s building and interior business is constantly showing a positive financial performance, which is expected to offset concerns about increasing short-term borrowings. LX Hausys generates earnings before interest, taxes, depreciation and amortization (EBITDA) of more than 200 billion won every year. It recorded EBITDA of 250 billion won in 2020 and it is expected to exceed this level this year.

But there are still uncertainties. LX Hausys reflected an asset impairment loss for the automotive division in a non-operating expense in the second quarter, which made the company swing to a net loss. The company also reflected an asset impairment loss of 130.4 billion won for the division in a non-operating expense in 2020.

In March, Hyundai BNG Steel and LX Hausys agreed to cancel the deal to acquire the automotive and industrial film business, possibly due to a price gap. (Reporting by Euna Jo)
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