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Edited Transcript of 051910.KS earnings conference call or presentation 24-Apr-19 7:00am GMT

Q1 2019 LG Chem Ltd Earnings Call

Seoul Apr 26, 2019 (Thomson StreetEvents) -- Edited Transcript of LG Chem Ltd earnings conference call or presentation Wednesday, April 24, 2019 at 7:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Ho-Young James Jeong

LG Chem, Ltd. - CFO, Internal Accounting Control System Officer and Director

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Conference Call Participants

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* Rui Hua Ong

JP Morgan Chase & Co, Research Division - Analyst

* Yeon-ju Park

Mirae Asset Daewoo Securities Co., Ltd., Research Division - Research Analyst

* Young-chan Baek

KB Securities Co., Ltd., Research Division - Analyst

* Yusik Hwang

NH Investment & Securities Co., Ltd., Research Division - Chemical and Refinery Analyst

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Presentation

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Unidentified Company Representative, [1]

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Good afternoon. This is [Hong Sun Beom], Head of IR at LG Chem. Thank you for taking an interest in LG Chem and joining this call despite your busy schedules.

We will now start LG Chem's 2019 Q1 earnings conference call. We will begin with the introduction of company executives on this call, followed by the 2019 Q1 earnings performance, 2019 Q2 earnings outlook and Q&A session. The earnings and outlook presentation will be interpreted simultaneously while the Q&A will be interpreted consecutively.

Let's begin today's call with the introduction of the management team. We have on the call, COO, Ho-Young Chung; Head of Business Strategy, [Char Nam]; Head of Business Planning, [Hyang-Sok Lee]; [Wan-Ju Mun] from Petrochemicals; [Hung-Shi Kim] from Energy Solutions; and [Wu-Sung Kim] from Advanced Materials.

We will now present LG Chem's 2019 Q1 earnings performance, followed by our outlook for the second quarter. First, 2019 Q1 P&L. Q1 sales was KRW 6,639.1 billion, a 9.6% decrease on quarter and a 1.3% increase on year. Operating profit was KRW 275.4 billion and operating margin was 4.1%. Q1 EBITDA was KRW 682.2 billion, EBITDA to sales was 10.3%. Pretax income was KRW 279.6 billion and net income was KRW 211.9 billion.

Next, our financials. As of the end of Q1 2019, assets was KRW 31,212.2 billion, a 7.8% increase from the end of 2018. Liabilities was KRW 14,012.9 billion, an increase of 20.6% and bonds increased by KRW 1,600 billion to KRW 6,904.7 billion from the end of 2018.

In the first quarter, there was a preemptive funding of required capital through domestic core [growth] bond issuance for automotive batteries, CapEx. And consequently, the duration to the liabilities to equities both increased.

Next, divisional results and outlook. The company restructured as of April 1, and we will be reporting earnings based on the new organization structure. Earnings based on the previous organization have also been attached to facilitate performance comparison before and after the reorganization.

First, petrochemicals. 2019 Q1 sales was KRW 3,748.8 billion. Operating profit was KRW 398.6 billion and operating margin was 10.6%. Despite the turnaround in Yeosu NCC in Q4 and turnaround in Daesan in Q1, [destock,] including naphtha prices, stabilized. And spread rebounded from end of last year, delivering greater spreads for core products such as ABS and PVC due to the restocking demand. In particular, we expect that a loss of KRW 120 billion for the Daesan turnaround. However, the company's processing technology and operational efficiency reduced the turnaround period and as a result, expected loss was reduced by 20%.

Regarding market outlook. Oil prices are rising due to the recent geopolitical risk and while the performance in the upstream remains weak due to uncertainties in demand. We expect gradual improvements in the demand for downstream products, including ABS, with greater visibility in China stimulus package. LG Chem expects profitability in Q2 to be better than Q1 due to the base effect from the completion of the turnaround in Daesan, increased sales and profits from the revamping, onboarding of new capacity for SAP and ABS and gradual improvements in the demand for ABS and et cetera.

Next, Energy Solutions. In Q1, Energy Solutions sales was KRW 1,650.1 billion due to the suspension of domestic market delivery of ESS and seasonality in IT and automotive batteries.

The following sales volume impacted profitability along with compensation for sites' suspended operation from the ESS

fire. Moreover, one-off expenses, such as losses from declining sales and initial cost burden from new automotive battery production line operation, contributed to the operating loss of KRW 147.9 billion.

Regarding the outlook for the second quarter, improvements in profitability is likely to be limited due to possible additional losses from ESS, of course, not to the extent in Q1 and initial cost for the operation of the new automotive battery production line. However, greater sales volume of the gen-2 EV batteries to European OEMs, robust demand from new markets for small cylindrical batteries and an increased supply of ESS to the European and North American markets will deliver sales volume growth and improved profitability. Profitability to significantly improve with the acceleration of the sales growth in the second half.

Next, newly aligned as of April 1, Advanced Materials. Advanced Materials include the existing I&E Materials and automotive materials such as the EP business. Advanced Materials sales in the first quarter was, and this is after reorganization, KRW 1,233.9 billion. And operating profit was KRW 3.5 billion with 11% Y-o-Y growth, thanks to the growth in battery materials despite the seasonality in the downstream display industry and declining sales of automotives in China. In Q2, we expect slight increase in sales while profitability to remain at the similar level due to the planned [core] repair of glass substrates.

Next, Life Sciences and Farm Hannong. In 2019 Q1, Life Sciences sales was KRW 143.5 billion and operating profit was KRW 11.8 billion. With greater sales of new product, Eucept, in Japan and increased sales volume of core products, such as YVOIRE, sales grew by 9% Y-o-Y.

Farm Hannong sales was KRW 228 billion and operating profit was KRW 38.2 billion. While sales of new product, Terrad'or, increased, sales fell due to selected bidding to secure profitability in the fertilizer business and some sales delays due to the lead time from product registration as a result of the introduction of crop protection registration system this year.

Life Sciences sales still continued to grow from greater sales of core products, such as Zemiglo, YVOIRE, Eupenta and new product, Eucept.

Meanwhile, R&D and marketing expenses are also going to increase. For Farm Hannong, with greater sales of new product Terrad'or and high value-added products, such as specialty fertilizers, the company expect sales to grow and profitability to improve.

This concludes our presentation on the earnings performance and outlook. We'd like to now start the Q&A session, and we will do the Q&A session through consecutive interpretation. (Operator Instructions)

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Questions and Answers

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Operator [1]

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[Interpreted] [Jin] from Hana Financial Investment.

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Unidentified Analyst, [2]

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[Interpreted] So there are two questions that I would like to ask you. First is about China. If you look at the Chinese economy in terms of the macroeconomic situation, it does seem to be that the situation is improving and there are also stimulus measures in place. However, if we look at the overall demand for your petrochemical products, it doesn't seem to be that the recovery is taking as fast. So on the short term, because of various safety-related investigations, how do you actually forecast the overall short-term demand in this area? And what would your view be for the second half demand? In addition to that, to ask questions about your ESS business. Because of the ESS fires, I do believe that there are some provisions that you have set aside in the first quarter. How much are those provisions? And how much do you think you will need to set aside, if any, in the second quarter? In addition to that, for your overall sales, because you have discontinued your sales in Korea, I do believe that there will have to be some adjustments to your guidance for 2019 and 2020. If you could please update those numbers, that would be appreciated.

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Ho-Young James Jeong, LG Chem, Ltd. - CFO, Internal Accounting Control System Officer and Director [3]

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[Interpreted] So this is the CFO. Maybe I can address your second question about the ESS business, and then ask someone else to address your first question about the petrochemical business. With regards to the ESS fires, as of now, we still are not -- we still have not been able to confirm whether the fire in itself was the result of issues with the product, specifically the battery or whether it was related to problems with regards to the overall installation environment and also the operating condition for which the ESS was being used. So the fact-finding on this site is something that is still in process. So therefore, we are looking into the possibility in making a review about whether there is a possibility that the fire could have been the result of a default or any defects with regards to the product in itself. However, we haven't been able to see any similar cases and this is not a situation that has repeat itself. So we are cautiously looking into the possibility that it may have been due to the way that the ESS was installed or maybe the overall situation under which it was operated. However, regardless of that overall situation, we still are looking into our product for the overall quality to ensure that we are able to create a more robust and safe product that can operate under various operating conditions.

With regards to the lost compensation in this area, we do believe that with regards to the various parties of interest, namely speaking, the ESS provider, also the project owner, the building owner and the government. Between these parties of interest, there will probably be a discussion about how the losses related to this event will be [shared] and who will bear such losses. However, this will be a discussion that will be -- have to take place over time. So as of now, we cannot make any determination as of how the outcome would be. With -- on the site inspection in itself and any losses related to the discontinuation of our product production, we are currently trying to be very conservative for our accounting treatment and assuming that we will have to bear 100% of the cost related to our operations. So as a result, if we look at the first quarter and the provisions that we have set aside for such loss compensation, we have set aside KRW 80 billion. In addition to that, because we have discontinued any shipments for Korea and the business here, there is a lost opportunity cost related to sales of around KRW 40 billion, which should be added to that amount. So for ESS, the one time -- off cost in the first quarter would amount to, in total, KRW 120 billion.

Interpreted So to continue -- to address your question about the second quarter and the additional losses that we may need to recognize there, basically speaking, we do think that for Korea sales, it would be difficult to normalize sales in the second quarter as of the current time. So we do think that the situation in which we will have to discontinue our shipments will continue in Korea. And this is something only that will normalize towards the second half of the year. However, we do not believe that there will be significant additional losses related to any lost compensation from a discontinuation of operations because of the 400-or-so sites that are currently being investigated, from the middle of April, one by one, they are actually being put back online. So as a result of that, we do think that the second quarter provisions, if any, would be limited.

To give you an idea about the full year guidance and the premise about -- upon which we would provide such guidance, initially, for last year, if we look at our ESS revenue, it was around KRW 850 billion. Of that amount, we did expect for this year on a Y-o-Y basis that there would be a growth of around 80%. As of the current time, our view is that under the current conditions that the growth that we would expect for this year on a Y-o-Y basis, it would be challenging to reach around 50% growth.

Interpreted In addition, while we're talking about the one-off costs for the ESS business -- though you have not asked this question in detail because we are talking about one-off, maybe to just elaborate a bit more. For the ESS business, as mentioned before, the one-off cost recognized within the first quarter was around KRW 120 billion. In addition to that, we did have planned for the first quarter a turnaround for our design and safety. And therefore, the cost related to that would be another KRW 80 billion. In total, therefore, for the first quarter, for the whole company, in terms of the one-off costs that were recognized in total, it would be around KRW 200 billion.

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Unidentified Company Representative, [4]

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[Interpreted] Maybe to talk about the first question that you have asked, which with regard to the petrochemical business, this is [Wan-Ju Mun], and I am the VP of Business Strategy for Petrochem. Maybe I can talk about the overall effects that we have seen for China and with regards to the various stimulus measures that have been taken and also the outlook for the second quarter. If we look at the overall situation in -- as of March, if we look at the developments that have -- been taking for the U.S. and China for the various trade wars that -- or the trade disputes that have been taking place, there are positive signs that we have been able to see there. And in addition to that, in the 2 sessions in China, there are various stimulus measures that have been taking place. So as a result, we do think that the overall situation versus the beginning of the year has been much more positive. In addition to that, we do think that there are many measures that the Chinese government has been thinking about. For example, there is the VAT lowering. And in addition to that, there are various subsidies that the Chinese government has said that they would be providing for home appliances and also in other areas. So all in all, we do think that these are measures that are going to be taking place or will start to take place as of April in the current situation. So as a result of that, we do think that the overall demand, in this area, will be boosted by the events that have been taking place. And as a result of that, we do think that for our consumers, who are the home appliance manufacturers and also the other manufacturers, that there should be positive signs that we will be able to see here.

In terms of the overall product production that we have seen, there is a overall situation in which we will be able to benefit from. For example, for the subsidy levels, if you compare the situation currently to that of 2011 in which there were similar subsidies that were introduced, we do believe that this time around, the overall effect should be something that we will be able to see. And all in all, as a result of that, we do think that the overall situation should be positive.

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Ho-Young James Jeong, LG Chem, Ltd. - CFO, Internal Accounting Control System Officer and Director [5]

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[Interpreted] So maybe as the CFO, if I could add on a few comments to what has currently been said. In terms of the measures that the Chinese government has been taking to overall stimulate the economy and try to stimulate demand, we do think that those measures are in place. However, if you look at the overall situation, we do believe that it is due to a more structural downturn that we see in the economy. So therefore, as a result of that, the various policy measures may have some effect, but we do think that the effect will be limited. If we compare, for example, the level of subsidies that have been provided recently to that of -- right after the Lehman crisis or the financial crisis that we have seen in the past, the size of that also is on a very limited basis. So if we -- so as a result of that, if we look at the situation for the petrochemical business as a whole, we do think that it will somewhat help stimulate more demand for the petrochemical business and have the role of priming the pump for the well in itself. But in terms of the scale of the overall impact in the short term, we do think that there will be limitations.

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Operator [6]

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[Interpreted]. Next, Ju Park from Mirae Asset Securities.

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Yeon-ju Park, Mirae Asset Daewoo Securities Co., Ltd., Research Division - Research Analyst [7]

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[Interpreted]. For the battery business, I would ask some -- I would like to ask some questions. I do think that on the EV battery side, the third-generation product is something that we will actually see from 2020 to be produced. However, if we talk to the OEM manufacturers, they are talking about launching these products in 2021. So the question that I would like to ask is about the your midterm horizon in terms of the overall possibilities of this business going forward. For example, if we were to talk about the years 2022 and 2023 in terms of the top line sales for the EV battery business, how much sales do you think you would be able to generate? And in addition to that, in light of the supply and demand dynamics and also the cost of savings efforts that you will be making to lower your cost base, over the midterm, what would be the margin levels that you would be able to enjoy for this business?

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Unidentified Company Representative, [8]

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[Interpreted] So maybe I can address your question about our Energy Solutions business. For the Energy Solutions as a whole, maybe I can talk about specifically the EV batteries, the outlook for this year and then talk about next year and thereafter. For this year, the guidance that we had given you at the end of last year for the full year of 2019 was revenues of around KRW 10 trillion for the battery business as a whole. And we had said that around 50% of that revenue would be coming from the EV batteries, 50% or more. So for this year, as of the current situation in terms of the guidance level also for the margin levels, we also said that we did believe that we would be at around the breakeven point level. In the first half, there was some up and downs, but we have been hovering around that overall situation. And in the first quarter, we're not very different from that overall trend. So the losses that we have seen here in terms of the margins was in the low single digit, but it was very close to the breakeven point. In the second quarter, we do think that the overall situation will improve and more so in the second half of the year. So at the end of the year that we will be able to see margins be at the mid-single-digit level. And that is where we will end up. So all in all for this year, achieving a margin higher than the breakeven point, which was our initial guidance, is something that we still believe will be achievable without any major issues. So that's the situation for this year.

To talk about our mid- to long-term view, this is something that we have been updating you about. Of course, we continue to receive more orders on a Q-o-Q basis. This is something that has continued to increase. So if we add on the new orders that we have been able to receive in the first quarter, as of the end of March, our total order book stands at over KRW 110 trillion. So for the guidance per year going forward, we will have to provide you with some update after looking into more detail about the number, but we do think that the overall trend that we talked about for the Energy Solution business, having, for example, total sales of around KRW 10 trillion for this year, around KRW 15 trillion for next year and then KRW 20 trillion from the years thereafter, that growth path in itself. I think it's something that is still valid. And if we think of where the main driver of growth is coming from, that would be our EV batteries.

For the margins that we are looking for and our expectations on the profitability side, as mentioned before, from next year and thereafter, we do think that we will continue to have and be able to generate an operating profit margin of mid-single-digit level. And that would be the overall margins that we are forecasting. And if we look more down the road, for example, to the year 2021 and thereafter, then I do think that we would be able to achieve margin levels of the high single digits or low-teen area.

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Operator [9]

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[Interpreted] Next question is from Young-chan Baek from KB Securities.

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Young-chan Baek, KB Securities Co., Ltd., Research Division - Analyst [10]

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[Interpreted] There are two questions that I would like to ask you. First, is about your latex business. In the second half of -- from the second half of last year, I think that the overall profitability of this business is something that has been improving. So what would be the backdrop for that overall improving environment? And in addition to that, would the company be in a position or do you have plans in which you would actually be able to expand your capacity in the latex area if it were needed? The second question that I would like to ask you is about your EV battery order book. I do believe that there has been some talk within the marketplace that one of the latecomers within this area, which is SK Innovation, that they have been very competitive in trying to win new orders. So that as a result of that situation, that the competition within the overall market place has been heating up. So if you could talk about your view about the overall order dynamics and the competition related to that in the first half, that would be appreciated.

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Unidentified Company Representative, [11]

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[Interpreted] Maybe I can address your first question about the latex business. This is [Wan-Ju Mun], the VP of Business Strategy for petrochemical. If we look at latex in the areas in which it is being used, it is being used in clean rooms and also for medical purposes and other areas in which there is a strong recognition of the overall health care benefit that these products can have. And as a result of that, latex gloves are coming as a strong alternative for natural rubber gloves. And as a result of that, if we look at the demand on a per-year basis, we have been able to see growth that is above 100 -- 10%. If we look at the throughput, all in all, it has been running at over 100%. This year, on a global basis, there has been around 100,000 tons of capacity that has been added. So because of that overall situation, there has been a slight dip in the overall throughput ratio. However, because of the strong demand growth that we are seeing in this market, we do think that this is something that can be easily recoverable. And going forward, we do think that because of that, there will continue to be a shortage of supply within this market. As the #3 player within this market space, we are interested in making further inroads within this market. For example, the strong markets would be Malaysia and also China. So making further inroads into that market is something that we are interested in. So there are various business cooperations that we're trying to achieve there, and this is an area in which we will try to benefit from the high growth and high profitability.

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Ho-Young James Jeong, LG Chem, Ltd. - CFO, Internal Accounting Control System Officer and Director [12]

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[Interpreted]. So this is the CFO. Maybe I can add on some comments about this topic. For the NBL market, and if you look at the reason why the overall market has improved, I do believe it's driven by the strong demand that we see. In the past, the application of this material was only for medical purposes. But now, it is being used and applied in a wider variety of areas. And as a result of that, the demand has been increasing. So for the petrochemical area, to see a factor in which there is -- on a CAGR basis, around 10% growth, is very rare. However, this is one of the segments that would be able to achieve that level of growth. So as a result of that, if you look at the other players in the market, there are some that are aggressively making investments. And capacity, as a result, has been increasing. And because of that, I do think that there are some concerns that the supply and demand dynamics in this area for the balance in itself may be an issue. However, as mentioned, because we do think that demand will continue to be strong, we think that for the time being, that the NBL in itself should be a very tight market and as a result of that, a market in which there continues to be a very strong demand requirement. So as a result, from our company's standpoint, we are preparing to deal with the situation. We do think that we will be able to engage upon plans to overall increase our capacity for this segment. However, for it to actually be something that you can see in terms of the top line or in terms of our overall margins, we do think that there will be a time line of around 1 to 1.5 years after which, you would be able to recognize them.

Interpreted And to address the second question that you had about the EV battery overall dynamics within the market situation and the orders that we see and the competitive dynamics within this market, it is true that for some of our competitors, there are very aggressive price competition that they are trying to present in terms of the situation. So that is a fact. However, as we have mentioned before and as we continue to be, our stance on this topic is that we want to have a very consistent stance, which is that we will only engage in products in which we do see the profitability and also which make economic sense for us to be engaged upon. So at the center of how we look at projects would be profitability. With that have been said, for the automobile OEM companies, if we compare the prices that we have been presenting to them to that of some of our competitors and their price levels, there may be cases in which there are big differences. And our competitors may be providing more aggressive price levels than we have been providing. So that is a situation. However, nevertheless, even with that happening, if we look at the large-sized awards that we have been able to win, I do think that there are some considerations that are taking place. For example, having the lowest price in itself is not just the consideration that these clients are making, but they're looking at the performance, the technology, the flexibility that can be provided and also the overall stability and safety of the products that are being created. So I think that these are considerations which are at the center of granting awards or granting orders. So as a result, we, going forward, will continue to, as much as possible, be focused on the value of the projects that we're engaged upon and also the profitability levels.

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Operator [13]

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[Interpreted] Next question is Parsley Ong from JPMorgan.

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Rui Hua Ong, JP Morgan Chase & Co, Research Division - Analyst [14]

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I have two questions. The first question is on your EV battery division. Could you tell us more about your plans for internalizing battery material production and the type of synergies or margin improvement you expect? As you know, cathode maker, Umicore, recently cut their profit guidance and their midterm capacity ramp-up plans, which they said was because of weaker China EV-related demand. But is LG Chem seeing weaker China EV demand at all? Or is it possible that they're also seeing some more competition even from internalization of battery material production by EV battery makers? The second question is on -- also on the batteries division. So there has been news of Volkswagen potentially partnering SK Innovation to make EV batteries, kind of similar to the relationship between Panasonic and Tesla. Could you share if that's your thoughts about OEMs doing joint ventures with the battery makers? And has there been any interest from OEMs in acquiring a stake in LG Chem's technology or EV battery business?

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Unidentified Company Representative, [15]

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[Interpreted] So maybe I can address your first question with regards to the material for our EV batteries. In order to deal with the increasing demand that we see for EV batteries, we do think that on the material side, there needs to be very prudent control with regards to the overall supply chain management. And therefore, for cathodes, which we do believe is one of the key competitiveness factors for our batteries in itself, we are very interested in developing more proprietary technology and also -- not only for the product side, but also to ensure that we have stability of supply, internalizing around 40% of the production of this material that we would require for our battery business. So that would be up to 40%. However, for the other material that goes into the battery business in itself, rather than focusing on internalizing those materials and the production, we do think that it is a better approach to be able to ensure that we continue to have a very secure supply of the material that is being supplied for our operations and also the technical competencies that are required to continue for development.

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Unidentified Company Representative, [16]

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[Interpreted] So my name is [Hung-Shi Kim] and I am the VP for Business Strategy for Energy Solutions, and maybe I can address the second question that you had. Because the overall EV market in itself recently has been showing very high levels of growth, it is true that for the global OEM companies, that they are looking into not only for their batteries multi-sourcing to ensure that they have a stable supply of the batteries that they require, but they're looking into other alternatives such as setting up JVs with the battery manufacturers. In the case of a JV in itself, from a battery producer's perspective, we do think that there is the benefit that we would be able to have a stable purchase -- a stable client to which we would be able to sell. However, there is also the other side of that. The risk that the core technology for our battery production could be leaked to other parties. So we do think that this is a issue which requires very cautious approach and cautious review. So from our perspective, according to the characteristics of the market and the characteristics that our clients have and the client profiles, we are open to reviewing a lot of different methods of cooperation, which would include a JV which -- within OEM, which would be a strategic partnership or other various measures through which we would be able to strengthen our business.

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Operator [17]

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[Interpreted] The last question is Hwang Yusik from NH Investment Securities.

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Yusik Hwang, NH Investment & Securities Co., Ltd., Research Division - Chemical and Refinery Analyst [18]

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[Interpreted] There are two questions that I would like to ask you. First is for your EV battery business and your secondary battery business, in general. I do believe that for your Poland site and also the second factory that you have in China, that there is some pilot testing that is currently being done in terms of the overall process. And I do believe that there is new technology and new mechanics or engineering that is being applied at the site. So under the current situation in which you were still pilot testing these facilities, what is your overall utilization rate that you see there? And once the overall facilities have been stabilized and fully ramped up, when do you think that, that will take place? And what do you think your level of productivity would be able to be at that point of time? The second question I would like to ask you is about your Advanced Materials business. I do think that that fact that you have a separate business line for Advanced Materials represents the fact that your overall focus of your business is moving from the LCDs of the past to more OLED and also auto-related materials. So that is the shift that, that represents. So that probably means that you will have to invest for these businesses more. What would your overall plans be for the mid to long term for CapEx for these businesses? And what would be the schedule of that execution?

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Unidentified Company Representative, [19]

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[Interpreted] So this is [Hung-Shi Kim], maybe I can address your first question. For the lines that we have built in Poland and in China, it is true that versus the existing lines that we have in terms of the overall production speed, we do see a 20% increase in the productivity. And also for the CapEx that was required per capacity, we have seen an improvement of around 30% for these new facilities. So as of now, because there are new engineering technologies and also new technology, in general, and processes that we have been able to incorporate for these new facilities, we are still ramping up the yield. The ramp-up of the yield in itself is a bit slow. So we haven't been able to reach the levels that we had expected yet. But we do think that this stabilization process is something that we will be able to complete within the first half of the year. And from the second half of the year, we would be able to see normal levels of yield.

Interpreted For the Advanced Materials business and the overall strategy going forward and the investment that is required, this is, of course, the point of your question, I think that I would have to say that before we went through this reorganization process, if you looked at the existing businesses, which would be the IT and Materials business and also the electronic parts that we had had over the mid to long term, the CapEx that this existing business had represented on a per-year basis, on average, would be around KRW 600 billion. However, since we have revamped this into a new business line, which is the Advanced Materials business, I think that we're at a point of time right now in which we need to recheck the overall priorities that we would have for this business line and also the speed at which we would make investments. So as a result of that, the targets that we would have for the future are something that we need to redefine. Once we have finished this process of redefining the targets and also looking at the financing plans for that investment, I think that, that is information that we would be able to share with you towards the second half of the year.

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Operator [20]

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[Interpreted] So with this, we would like to wrap up the First Quarter 2019 LG Chem Earnings Conference Call. Because of the time limit, we were not able to address maybe all of the people who had questions today, but please do not hesitate to contact the IR team if you have further questions. Thank you once again for all of you who have participated.

[Portions of this transcript that are marked Interpreted were spoken by an interpreter present on the live call.]