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S&P lowers LG Chem outlook to negative on risk of growing debt

S&P Global Ratings revised the outlook on LG Chem Ltd. to negative from stable, citing the company's "aggressive" financial policy and rising debt.

The rating agency said a volatile petrochemical market is expected to limit the increase in LG Chem's earnings from its energy solutions units in the next two to three years. The company's planned 6 trillion South Korean won in capital expenditures for 2019 to expand its electric vehicle battery and petrochemical plant capacities also exceeds the rating agency's expectation. In 2018, LG Chem's capital expenditure was 21% higher than its previous guidance of 4.6 trillion won.

The company's debt-to-EBITDA ratio is expected to deteriorate to 1.5x to 1.8x in the next two years as its projected cash flow will not be sufficient to cover the planned investments and dividends, leading to higher debt, Ratings wrote. LG Chem had a debt-to-EBITDA ratio of about 1.0x in 2018.

The rating agency affirmed LG Chem's long-term issuer credit rating at A-.

As of March 13, US$1 was equivalent to 1,130.75 South Korean won.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings.