165438+1On October 9th, Yonhap News Agency reported that the battery business subsidiary that LG Chem will split next month was finally named "LG Energy Solutions". It is understood that "energy solution" is the original English name of LG's chemical battery business, and such "seamless connection" can make the new company reduce a lot of troubles caused by renaming.
At the end of 10, LG Chem held a general meeting of shareholders to vote on the proposal to split the battery business. More than 77.5% of the shareholders participated in the voting, and the final split plan was passed with 82.3% approval rate. However, at the meeting, the National Pension Corporation (NPS), the second largest shareholder of LG Chem, held an objection on the grounds that this move may harm the interests of shareholders and dilute the equity value. Indeed, after the split news was announced, LG Chem's stock closed down by 6. 1 1%, but by handing over the "custody right", the new company can start public offering, which has a positive impact on its development and the overall profit of the group.
I have long planned to "stand my hand"
In fact, LG Chem started the idea of divesting the battery business a long time ago. At the end of 20 19, LG Chem began to discuss divesting the new energy battery business, but with the arrival of the epidemic at the beginning of this year, the plan was postponed.
The epidemic situation not only greatly reduced the global sales of new energy vehicles, but also had a great impact on the power battery business, and the entire industrial chain upstream of automobiles was spared. Relevant market research institutions and rating agencies have lowered the sales forecast of new energy vehicles this year. Due to the stable demand of the battery business department, LG Chem's split plan was forced to press the pause button.
As of March, the working group responsible for the separation of the battery division issued an opinion report to the group, saying that due to various business obstacles and difficult market conditions, the company will not be profitable after the separation. Since then, LG Chem's battery business split plan has been postponed indefinitely, and the "TF" working group responsible for the divestiture of the battery department has also been dissolved.
From the actual situation, it is very reasonable for LG Chem to stop splitting the battery business in the first half of the year, but now the global situation needs to start the stripping scheme again.
According to the research data of IHS Markit, the average annual growth rate of the global electric vehicle battery market is 25%, and it is estimated that the global market scale will reach 654.38+06 billion US dollars by 2025, which is more than 400% higher than the 38.8 billion US dollars in 2065.438+09. This also shows that the automotive power battery market has broad market prospects.
At the same time, according to the third quarter financial report released by LG Chem, its battery business income reached 3144 billion won (about RMB186310 million yuan), an increase of1.4% from the previous month and a year-on-year increase of 42.3%. At the same time, some analysts predict that the volume of this business will surpass the petrochemical industry of LG Chem's old bank next year.
It is the sharp increase in market demand and the rapid growth of its own development that gives LG the confidence to spread "children" in chemistry.
The goal of the new company is an initial public offering.
However, the direct reason why LG Chem chose to split the battery business is not here, but because the manufacturing of batteries is "too expensive", and the continuous investment in the battery business has led to an increasingly heavy financial burden for the company.
According to public data, due to the end of the petrochemical boom in the first half of 20 18, the cash flow of LG Chem shrank and the investment in battery business continued to expand, which made the loan amount of LG Chem increase rapidly in 20 19, which undoubtedly increased the financial pressure of the Group.
Comparatively speaking, the net loan of LG Chem was less than 300 billion won in 20 17, but it soared to 3 trillion won in 20 18, an increase of about 10 times in just one year. By the end of 20 19, its net loan had exceeded 7 trillion won, which was 20 times in two years.
It is precisely because of the ever-expanding debt pressure that LG Chem began to consider divesting the battery business. After the divestiture, the competitiveness of LG's chemical battery division will be improved, and its commercial value and attractiveness to investors will be stronger.
According to the statistics of "New Energy Vehicle Industry Chain Database" recently released by GGII, among the top ten global power battery enterprises in the first three quarters of 2020, LG Chem became the new industry leader with the installed capacity of 19.28GWh.
According to relevant analysis, as European and American car companies seem to prefer Japanese and Korean battery suppliers, driven by the production and sales of Tesla Model 3, Renault Zoe and Audi e-tron in the European market, the market share of LG Chem has greatly increased in the first half of this year.
However, traditional European enterprises are constantly entering the new energy market, and Tesla also increased the demand for LG Chem's China factory in July this year, which means that LG Chem will have more orders for power batteries. But for it, it will also face a black hole in production capacity, and LG Chemical can only overcome it by building a factory to expand production.
GGII said that LG Chem has once again expanded its Nanjing Xingang factory and built a new battery factory in Jiangning District. At the same time, it plans to establish a second factory in Europe in Spain. Such frequent investment has brought great financial pressure to the company. Che Dongzhi, CFO of LG Chemical, once said: "Due to the substantial increase in capacity investment, the company's debt has risen, which has limited the company's growth."
Therefore, although LG Chem will temporarily own 65,438+0,000% of the shares in the initial stage of the new company, its future goal is to conduct an initial public offering (IPO) and sell 20%-30% of the shares to raise more funds to meet Kiki's future investment needs.
LG Chem missed the opportunity to "enjoy happiness"
Although splitting the battery business can alleviate the financial pressure of LG Chem, it does not mean that the new company can "enjoy happiness" in a down-to-earth manner. As the strongest competitor, Contemporary Ampere Technology Co., Ltd. will be put into production on 202 1, although the layout in Europe is a little late. At the same time, it plans to build a factory in Indonesia to seize the Southeast Asian market. At that time, Contemporary Ampere Technology Co., Ltd., which is fully implemented in the sea plan, will share the cake of the global battery market with LG Chemical.
In addition, the dispute over the route of the next generation battery is also unclear. Whether it's 8 1 1 of contemporary Amperex Technology Co., Ltd., or lithium quaternary developed by LG, or BYD's blade battery, etc. Many manufacturers have different research directions, but these routes have opportunities and risks. Once mistakes or iterations are made, the ranking of the industry will be variable. From this perspective, the future survival pressure of LG Chem cannot be ignored.
Although splitting the battery business at present will make LG Chem by going up one flight of stairs, in the long run, whoever can reduce costs and increase efficiency and stand out from the battle for the next generation battery will be the well-deserved "king" in the global power battery track.