SEOUL -- LG Chem's operating profit fell 60% in 2019 to 895.6 billion won ($750 million), the company said on Feb. 3, as it spent around 320 billion won to prop up its ailing battery business.
The South Korean chemical and battery maker was hit hard last year by problems with its energy storage systems, a number of which caught fire in South Korea. The batteries are designed to store electricity generated by solar and wind power systems.
LG Chem's sales of batteries for electric vehicles rose. Overall, the company's revenue increased 2% to 28.6 trillion won. However, operating profit fell for the second straight year.
The petrochemical business, which accounts for 54% of the company's sales, produced an operating profit of 1.42 trillion won. But the battery operations, which contribute less than 30% of sales, lost 454.3 billion won.
Despite the setbacks, LG Chem continues to invest heavily in EV batteries, including a joint venture with U.S. automaker General Motors to build a new factory that will produce batteries for electric cars. LG Chem forecasts battery sales will rise 79% to 15 trillion won in 2020, which would put the business on par with the petrochemical operations.
The company faces tough competition from Chinese rivals in EV batteries, weighing on its profitability, in addition to weak demand for smartphone batteries. In the EV battery market, China's Contemporary Amperex Technology Co. Ltd. and BYD are spending heavily on development and manufacturing, in tie-ups with big automakers.