LGCLF - LG Chemical Co. Ltd. (LGCLF) Q3 2023 Earnings Call Transcript
2023-10-30 04:59:02 ET
LG Chemical Co., Ltd. (LGCLF)
Q3 2023 Earnings Conference Call
October 30, 2023, 01:00 AM ET
Company Participants
Hyun-suk Yoon - Head, Investor Relations
Dong Seok Cha - Chief Financial Officer
Young Suk Lee - Business Planning
Kide Young - Petrochemicals
Hyun Suk Lee - Advanced Materials
So-Hee Yoon - Life Sciences
Conference Call Participants
Simon Lee - Macquarie
Parsley Ong - JPMorgan
Oscar Yee - Citi
Presentation
Hyun-suk Yoon
Good afternoon. We will now start LG Chem's 2023 Third Quarter Earnings Conference Call. This is Hyun-suk Yoon, 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 begin with a brief introduction of 2023 Q3 earnings performance, followed by the CFO presentation highlighting the company's earnings results and then a Q&A session. The presentations will be interpreted simultaneously, while the Q&A will be interpreted consecutively. The material presented during this call can be viewed by those with web access. It is also available for download from our corporate website.
Let's begin today's call with the introduction of the management team. We have CFO, Dong Seok Cha; Young Suk Lee from Business Planning; Kide Young [ph] from Petrochemicals; Hyun Suk Lee [ph] from Advanced Materials; and So-Hee Yoon [ph] from Life Sciences.
Let's begin with the business performance. On Page 3, consolidated Q3 sales and P&L. Q3 sales fell slightly Y-o-Y and Q-o-Q at KRW 13,495 trillion. Operating profit increased Q-o-Q at KRW 860 billion, and OP margin was 6.4%, thanks to the turnaround in Petrochem business and increased earnings by Energy Solutions.
Next, Page 4 is our consolidated financial status. As of the end of the third quarter 2023, assets were KRW 77,500 trillion, liabilities were around JPY 36 trillion and capital was around KRW 41,400 trillion. While the debt ratio and borrowings ratio slightly increased from the convertible bond issuance in July, cash balance increased by KRW 2 trillion on quarter to record a similar level of net borrowing ratio. Net asset value per share was KRW 417,000 on an increase on quarter.
Next, earnings by business division. Page 5, Petrochemicals division. In Q3, a turnaround in the Petrochem business with sales at KRW 4,411 trillion and operating profit at KRW 37 billion. The sluggish market situation due to weak demand from downstream industries continued. However, supported by the positive lagging effect from the rise in naphtha prices, process efficiency and cost reduction activities and continued solid sales of high-value premium products such as POE and CNT earnings turnaround after three quarters.
In the fourth quarter, oil prices remained high due to geopolitical risk and global economic uncertainties to proceed. We plan to pursue activities to improve profitability by offering new production lines for high value-added products, such as the operation of the expanded POE line and continue to optimize production and operation in product growth with reduced profitability.
Next, Advanced Materials. In Q3, Advanced Materials sales was KRW 1,714 trillion, a 15% decrease Q-o-Q and operating profit was KRW 129 billion. The sales volume of battery materials was maintained as shipments to the U.S. market increased in lieu of a decreased demand for electric vehicles in Europe, but both sales and profitability decreased due to a drop in sales prices from the decline in metal prices.
We expect the reverse lagging effect to continue in the fourth quarter due to the sluggish European market and falling metal prices, but we'll continue to pursue profitability improvement activities such as productivity improvement and cost reduction.
Next, Life Sciences. In Q3, sales was KRW 291 billion, and operating profit was KRW 15 billion. Sales decreased slightly due to a decrease in overseas shipments of vaccines and aesthetics, et cetera, over a turnaround in earnings, thanks to a decrease in one-off costs resulting from the acquisition of AVEO compared to the previous quarter as well as increased sales and profits for renal cancer treatments.
Sales to increase in Q4 due to strong sales of major products such as IBs and auto immune treatment, but the global R&D investment is expected to continue to expand as new drug development projects progress.
Next, Farm Hannong. Q3 sales was KRW 120 billion, and operating loss was KRW 15 billion. While the overseas sales of the crop production products increased due to worsened fertilizer market conditions and restructuring of low-profit businesses, sales and profitability decreased on year.
Along with the restructuring of the general fertilizer business, which is in the red and expansion of overseas sales of special fertilizers due to the increase in domestic price of crop protection products and expansion overseas sales of tariff [ph] earnings to improve on year.
Last, Energy Solutions. On October 25, Energy Solutions presented their performance in detail during its earnings call, however, we will briefly present its performance. In Q3, Energy Solutions sales was KRW 8,224 trillion. Operating profit was KRW 731 billion and OP margin was 8.9%. Despite solid demand for our EVs in North America, sales slightly decreased Q-o-Q due to weak European demand and lower selling prices from falling metal prices, but profitability improved things to improve product mix, increase productivity, cost efficiency and increased IRA tax credit.
Although the impact of demand volatility and metal price decline due to global economic uncertainty will continue in the future, we expect to continue to strengthen our fundamentals by continued growth momentum center on North America and strengthen the competitiveness of various products. And on this note, we'll conclude the Q3 earnings and outlook presentation and invite CFO, Dong Seok Cha to present the highlights of the company's earnings performance.
Dong Seok Cha
Good afternoon. I am Dong Seok Cha, CFO of LG Chem. Thank you for taking part in the company's earnings release call despite your busy schedules. As you just heard, our profitability in the third quarter improved slightly, but a difficult business environment continues. High oil prices continue due to the war in the Middle East, and prices of major metals such as lithium for cattle production continued to decline.
Additionally, as interest rates remain higher for longer, there are concerns about a low economic recession and various uncertainties about demand for electric vehicles. However, there have always been difficult times, and we see to increase fundamental competitiveness within the company to wisely overcome crisis situations.
In addition to pursuing customer and regional diversification by establishing tech centers in the United States and Europe, we aim to create more differentiated customer value by quickly developing customized products. We will continue to strive to generate stable profit even in difficult situations by strengthening the fundamental competitiveness of our customer base. In addition, we will continue to grow through steadfastly, nurturing the 3 major new growth engines. And indeed, there was a lot of progress in the third quarter as well.
On the sustainability business, we decided to enter the HVO business, which produces biojet fuel and naphtha through collaboration with the Italian energy company, Eni. On the Battery Materials business, we announced plans to build on LSP cathode and lithium conversion plant in Morocco and also signed a cathode supply contract with a significant new customer other than LG Energy Solution.
On new drugs, sales of AVEO's flagship product, renal cancer treatment are growing as planned. And we are reorganizing our company-wide anti-cancer new drug pipeline portfolio, which includes the anti cancer pipeline at AVIO, which we acquired at the beginning of the year old. Your investors, depending on the macro situation, uncertainties may arise. But there will inevitably be times when we have to endure difficulties. But LG Chem will continue to grow by nurturing new growth engines, even in the midst of difficulty. We ask for your support. Thank you.
Question-and-Answer Session
A - Hyun-suk Yoon
Next, we will start the Q&A. To allow more people to ask questions, please limit your questions to one or two. [Operator Instructions] [Foreign Language] The first question is from the line of [indiscernible] Securities. Please go ahead.
Q – Unidentified Analyst
[Foreign Language] Thank you for the opportunity to ask questions. There are two questions that I would like to ask you. The first question is that if you look at the recent trends, lithium prices continue to fall. So I do believe that this may have a positive and both negative aspects on your overall performance. So what would be the overall impact that you see on the performance from the metal prices? And in addition to that, up until next year, how do you see metal prices trending? In addition to that, in terms of your overall inventory management, what would be the strategy there?
The second question that I would like to ask you is about China. If you look at the overall situation, it does seem to be that China is taking various measures to try to boost its economy. So what implications do you think that will have on the fourth quarter petrochemical business? And how do you see the next year's outlook for petrochemical as a whole?
Dong Seok Cha
[Foreign Language] So let me take your first question about the overall metal prices. So if you look at the price for cathodes versus the second quarter and the third quarter, the overall prices for lithium hydroxide had dropped around 20%. And as a result of that, the sales price also dropped around 20% on a Q-o-Q basis.
In the third quarter, again, if we look at the inventory for metal, the overall impact has been larger than in the second quarter. And if we look at lithium prices in the fourth quarter, it does continue to drop to around $22, $23. So as a result of that, we do believe that the overall impact on the fourth quarter versus the third quarter in terms of its overall size will be less. But we still believe that there will be negative impacts as a whole.
The way that we are dealing with this is we're trying to minimize the negative impacts from the metal prices as much as possible and try to manage our inventories also at a lower level. So according to the outlook on metal prices, we will try to be more flexible in terms of our overall inventory management.
Dong Seok Cha
[Foreign Language] Yes, I can address your second question on the petrochemical outlook that we have. If we look at the overall situation this year from China in terms of the overall impact of the reopening that took place there and also in terms of the various measures to support economy. In actuality, I don't think that we really felt the effects of that taking place. Though there is discussion about China possibly issuing sovereign bonds. In actuality, if you look at where the proceeds are going to be directed, it mostly would be in the infrastructure area. So whether this will lead to a boost on the consumption side and what the degree of that would be and the timing of that is still of a question.
So if we look at the second half of the year versus the first half of the year, in the second half, we don't think that there will be any big changes within the overall trends. In terms of the improvements in the overall utilization, it does seem to be taking at a more moderate price - pace.
If we look at the outlook for next year, first on the supply side, the amount of new additions that are coming out of China will be less. So as a result of that, the overall pressure coming from the supply side as a result, will be more moderate. In terms of demand, there are moderate improvements that are taking place. So versus this year, we do believe that next year will represent a recovery. [Foreign Language]
Hyun-suk Yoon
The next question is from the line of Simon Lee from Macquarie. Please go ahead.
Simon Lee
[Foreign Language] Thank you for the opportunity to ask questions. There are two questions that I would like to ask you. First is about the overall capacity that you are planning to build out in cathodes - LFP cathodes in Morocco. So with regards to the overall JV in terms of the capacity that the JV would actually represent in terms of when you are planning to start mass production and who your customers would be. That is what I would like to know.
And in terms of the sourcing that you would require for the lithium and also the precursors, where do you believe that would come from? And how are you going to cooperate with Huayou [ph] on that side. In addition to that, compared to the Chinese players in terms of the overall precursor competitiveness that you believe that you may have? What would be your competitors in this area? And in addition to that, I do believe that you will be trying to advancing your technology from the existing LFP technology to LMFP technology. So how would that process take place? And what do you believe would be the difficulties there?
The second question that I would like to ask you is about your number two NCC and also it does seem to be that, that is back online. So could you talk about the utilization for the various products that you have? And in terms of any additional asset sales that you have planned. Could you also elaborate about those plans?
Dong Seok Cha
[Foreign Language] So maybe I can address your question first about our plans in Morocco with the LFP cathodes. So if we look at the total capacity that this facility would represent on a per year basis, that would be 50,000 tonnes, and we are planning for mass production to start in 2026.
In terms of applications, we do believe that these are cathodes that can be provided to EV battery producers and also ESS battery producers, so ESS producers. And it would mostly be that we are currently in discussions with multiple parties that are planning to produce batteries within the U.S. However, as of now, we would not be able to disclose any specific names.
In addition to that, if you look at our relationship with Huayou right now, as of September, we did sign a comprehensive MoU. And right now, in terms of the details, this is something that is under discussion. So the overall agreement that we have as of this point is that on the lithium side, we would take the lead in that area. And with regards to the precursors, this is something that Huayou supply in collaboration with a local Moroccan producer.
In addition to that, in terms of our LFP competitiveness, we do believe that we will be able to be cost competitive in terms of our overall material sourcing. And we are planning to provide a differentiated solution so that versus the Chinese players, we can have a competitive edge.
Simon Lee
[Foreign Language] To answer your second question about the petrochemical business. Throughout the year, looking at the overall market backdrop in terms of our overall utilization, we have been adjusting it flexibly. So in the case of the Yasu [ph] facilities, it would not be an exception.
So if we look at the cracker right now in terms of the market there, there has not been a lot of changes. However, because oil prices have been rising, the overall value of - and cost of by products has been improving. In addition to that, for Comp [ph] and PO products, the market there has been improving somewhat. And also, we do believe that towards the end of the year for the higher-value PO products, there will be some capacity additions. So as a result of that, we have been trying to optimize our overall utilization to fit these overall changes. And as a result of that, we do think that there will be contributions that we will be able to make in terms of our overall profitability.
On the overall NCC/PO side, the utilization has been around 70% to 80% on the PVC, ABS and SAP side. We've been running at around 90% levels. So going forward, we do want to continue to see that for our overall portfolio and areas in which we do believe that the competitiveness is less or in terms of areas in which there is steep competition versus the Chinese players on more common products. We want to be able to revamp our portfolio so that we can more efficiently use the facilities that we have.
And therefore, it would be difficult to talk about the details, but we do think that on the more common products side and also in terms of some of the intermediate materials, there will be some adjustments there. And in terms of the overall utilization, that will continue to be flexibly adjusted. And for line conversions, we will continue to convert our line to be more focused on the higher-end products. [Foreign Language]
Hyun-suk Yoon
The next question is from the line of Jane Li from Sina Securities [ph] Please go ahead.
Q – Unidentified Analyst
[Foreign Language] Yes. Thank you for the opportunity to ask questions. There are two questions that I would like to ask you. First is with regards to your Advanced Materials business, if you look at the EV battery manufacturers, there does seem to be some overall adjustments that are taking place even at the OEM side because of the micro backdrop. So with regards to that, does the company have any adjustments in their overall cathode build-out schedule? And in terms of any changes to your strategy, anything that you would be able to share would be appreciated.
The second question that I would like to ask you is about your Life Sciences business. Since the acquisition of AVIO in terms of your pipeline, I do think that you are trying to optimize your pipeline portfolio and make changes to it. So if there's any update that you can provide that also would be appreciated.
Dong Seok Cha
[Foreign Language] So maybe to address your first question, even in terms of the overall demand that we have forecasted for EVs and also in terms of the guidance that has been laid out by OEMs versus those numbers in terms of our overall capacity plans, we were more conservative. So even though there seems to be some slowdown taking place in EV demand and some of the OEM producers are adjusting their numbers, we are not changing our capacity plans. [Foreign Language]
So maybe I can address your second question about the overall acquisition of AVIO and our overall pipeline going forward from Life Sciences. Right now, for the post-merger integration for AVIO, that overall process is going ahead very smoothly. In addition to that, for the overall gout treatment that we have, which has gone into Phase III clinical trials globally, we are currently ongoing with the target of receiving licensing by 2027. And right now, the overall multiregional Phase III clinical trials that include the U.S. are ongoing very smoothly.
In addition to that, for the rare genetic obesity drug that we have, we are preparing to have a Phase II clinical trial globally. And in addition to that, for the overall head and neck and cancer treatment that is being developed by AVIO, which we have talked about before, - this - right now, we are reviewing the possibility of developing a Phase III clinical trial. In addition to that, for various in-house developed cancer materials or potential cancel materials, we're also in the preparation stage to enter into clinical trials. [Foreign Language]
Hyun-suk Yoon
The next question is from the line of Jason Neil [ph] from Hana Securities. Please go ahead.
Q – Unidentified Analyst
[Foreign Language] So there are two questions that I would like to ask you. The first question is that if you look at your overall cash flow and also CapEx plans for this year and next year, it does seem to be on the funding side, you are selling some of your existing businesses to fund your CapEx. So according to your overall funding plan, do you think that on the battery materials plan, there may be some adjustments that may be made there. So specifically, with regards to your separators business, do you have any changes that you may see taking place? In addition to that, for any upstream investments, for example, for acquiring any equity stake in mines or so, do you have any plans in that area that you would be able to share?
The second question that I would like to ask you is that I do understand that you are planning to pursue HVO. However, I do understand that for the raw material that goes into this business, it is very difficult to source. So what would be your sourcing plan in this area?
Dong Seok Cha
[Foreign Language] So maybe I can address your first question about the overall possibility of our schedule changing in terms of investment for EV material. As we just mentioned during the answer about our capacity guidance and the possibility of changing that. It is true that if we look at the overall market, EV demand has been slowing. In addition to that, in terms of the expectations for volume that we hear from OEMs and also LG Enso [ph] it does seem to be that in the short term, there will be some slowdown in the overall demand.
However, that has been said, over a longer-term horizon, I do believe that for the CapEx plans that we have and for the capacity plans that we have built in, we have been conservative. So as of now, we don't see any big need to make any large adjustments. Specifically to talk about cash flow internally for how we will use our cash flow, we are looking at different priorities for CapEx and adjusting that accordingly. However, we will continue to consistently make investments in our new growth - top three new growth drivers, businesses, and so that will continue to go ongoing.
In terms of the possibility of upstream investments, for example, acquiring stakes in mines, we do agree with the overall need to have more value on the upstream side and that we need to be more present there. However, as of now, we want to see how the details of the IRA in terms of the metal requirements and also definitions actually play out.
So right now, we're looking at the possibilities on that side and reviewing such. So once the final interpretation of the details of the IRA are available, then I think we would be in a position to make our investments about the approach that we will be using for investments going forward. But as of now, we're opening up the possibilities to a wide variety of different scenarios and currently discussing with various parties about potential cooperation.
Dong Seok Cha
[Foreign Language] So on the petrochemical HVO side, if we can talk about this in more detail right now, this is an area in which you would actually add hydrogen to waste vegetable oil. And as a result of that, come up with a bio compound. And this is an area in which it can actually be used as an environmentally friendly fuel in the areas of aviation, diesel and also for naphtha.
So right now, we are further looking into this product because we do believe that there are global needs. And also, it is a contribution that we can take to cut CO2 emissions. So as a result of that, this is an initiative that we are taking from a larger stand scope to build a more BCB related platform.
So in Europe right now, ENI does already have HVO capacity. And in addition to that, it does have a network through which can actually sell the bio jet fuel and also has the waste vegetable oil source being available. So right now, our agreement with that party would be to have joint production and be the off-taker for the bio-naphtha. [Foreign Language]
Hyun-suk Yoon
The next question is from the line of Parsley Ong from JPMorgan. Please go ahead.
Parsley Ong
Hi. Thank you for the chance to ask questions. This is Parsley from JPMorgan. So I have two questions. The first question is on Advanced Materials. The market has been quite concerned about cash margin weakness in third quarter and fourth quarter. And yet LG Chem's Advanced Materials earnings in third quarter was better than expected. So could you share with us what were some of the key drivers? And what was the impact from the polarizer asset sale to Ningbo Shanshan [ph] Was there any one-off? And post this polarizer asset sale, what would be your revenue and OP margin outlook for the Advanced Materials division in the mid to long term. If you could break it down into the various remaining divisions, like castle, OLED materials, semiconductor business, et cetera, that will be appreciated.
The second question is on - I think someone asked earlier, whether you're considering selling your naphtha cracker since margins have improved and you have restarted the second NCC. Could you comment on that, please? And generally, what is your funding and financing plans over the next few years, if you're considering asset sales, then what are some of the key areas or assets you're potentially looking to sell down? And are you still potentially considering a sell-down in the LGS stake? Thank you.
Hyun-suk Yoon
[Foreign Language]
Dong Seok Cha
[Foreign Language] So maybe I can give you an answer about your Advanced Materials related question first. If you look at our third quarter performance for Advanced Materials and compare that performance to other competitors in the cathode area, the driver on why we were able to achieve better performances because for Advanced Materials, it is true that our cathode business is one of the main business areas. However, in addition to cathodes, we also have other businesses that are included into this portfolio. So having a well-balanced portfolio was one of the reasons why in terms of profitability versus our peers, we were able to perform better.
And in terms of the second part of your question about whether the polarizer related film [ph] and also materials business were contributed to our operating profit. From that plan or in itself or transaction, there was nothing that was contributed to our operating profit performance.
And for the sales on the IT material side to China and other efforts for the low growth areas and low profitability areas, we have sold some assets. And as a result of that, for IT materials, the overall size of that has dropped to less than KRW 1 trillion. However, in terms of our OLED materials and also semiconductor materials, there continues to be growth that is taking place in this area. And as a result of that, the overall target would be to have a 2-digit level type of growth or profitability, not growth.
And on the Advanced Materials side, over the mid to long term, I think that the target levels that we have, whether it be for EV materials or for other forms of Advanced Materials, it would be the same, and that is to reach a profitability of around 10%. [Foreign Language]
In addition, for the polar [ph] their business, maybe if I could add on some comments about that transaction and the overall impact of how that is going to take place. Right now, as of the third quarter, this business is now categorized as a discontinued business. And therefore, in terms of our overall numbers, it has been excluded from the 3Q performance and also retrospectively, we've also eliminated it from past performance numbers.
In addition to that, if we look at the sales proceeds that we're expecting from the polarizer business, it would be approximately KRW 1.1 trillion. In terms of the net assets, that would be subject to the transaction. This is something that we have not yet finalized, but we do believe it will be in the range of around 1.7 and 1.8, so as a result of that, if you look at the disposal gains, we do believe that roughly, it would be around KRW 900 billion. However, this is not something that we have recognized yet. And in terms of the timing of that, that most likely will come in either in the fourth quarter of this year or the first quarter of next year. [Foreign Language]
So maybe I can address your second question about our NCC whether there would be a possible sales in that area. And in addition to that, you also asked about our more general funding plans or financing plans for the future. So to address that overall question, with regards to our upstream competitiveness on the NCC side, it is true that if you were to compare ourselves to a company in which the refinery business and also petrochemical business is more integrated. We do seem to be less competitive in that area. And this is something that we do recognize.
So therefore, in order to secure more competitiveness on the downstream side rather than selling assets right now, we're looking at various initiatives or alternatives on how to strengthen our downstream competitiveness further. So right now, we're in the process of reviewing various strategic options that are available to us. And right now, there are ongoing discussions. So as of now, I think that is the extent to which we would be able to share with you that there are discussions that we have ongoing. And right now, I think that to a certain extent, with the counterparty, there are various options that we are currently reviewing.
In terms of asset sales and cash flow going forward, as we have said, across various opportunities, we do believe that it is an ongoing process for us to keep our portfolio healthy by looking at how we can deal with noncore assets and noncore businesses, whether it be the strategic options available to us or the possibility of sales. So this is a continuous process for us.
And by selling the polarizer related film business, we do believe that there will be proceeds of approximately KRW 1 trillion coming into the company that we will be utilizing. But - and that will probably come in next year. But from next year - from starting from next year across the 3 years following, this will be a CapEx-intensive period for us. So we do believe that it is a period of time during which we will have to be more mindful about our overall cash flow.
So in addition to the noncore assets, we also want to put more attention towards our working capital management, also make sure that we prioritize in terms of our CapEx requirements and try to initiate and continue on various efforts to try to improve our overall cash flow. So those will all continue to be efforts that we will continue to make.
And in terms of the possibility of selling some additional LGES [ph] shares, I think that over time, if there is the right time in which we need to utilize the shares and according to the overall investment amounts that we require, that may be a possibility. But as of now, we don't have any specific plans and it is not something that we are reviewing as of the current time. [Foreign Language]
Hyun-suk Yoon
We will be getting the question. The last question is from the line of Oscar Yee from Citi. Please go ahead with your questions.
Oscar Yee
Thank you. My first question is, could you share with us some rough CapEx guidance for your sort of RFP plus lithium refinery project in Morocco. I know it's still early stage, but any sort of rough indication about the total CapEx needed. And same, what would be the CapEx for your bio refinery in Korea as well? And can we assume you will own more than 50% stake for both projects?
And secondly, could you provide any update in terms of your separator plant ramp up in Hungary so far? Any indication of that? Thanks.
Hyun-suk Yoon
[Foreign Language]
Dong Seok Cha
[Foreign Language] So with regards to your question about the CapEx for the different projects. Right now, we have - we are in a stage in which we have only signed the MoU for these projects. So as a result of that, we don't have any definitive numbers that have been decided. Once that decision is made, we will make sure to communicate with you.
Dong Seok Cha
[Foreign Language] And to talk about the second question about the Hungary separator JV. This is a facility that has started operations in the first half of this year. So in terms of the overall utilization and also the yield in terms of productivity, this is something that we are in the process of improving right now.
And on a consolidated basis, this capacity will start to be consolidated from 2025. And before that, it will be reflected in our equity method valuation. In addition to that, for additional investments in the JV for separators, this is something that we want to explore in line with further investments in the U.S. for coating facilities. And that would only be determined after the IRA POC-related regulations are more clearly defined. [Foreign Language]
Hyun-suk Yoon
So with this, we would like to wrap up the third quarter earnings conference call for LG Chemical. Once again, for those of you that may have any additional questions, please do not hesitate to contact our IR team. And we would like to thank you once again for participating in today's call.
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LG Chemical Co., Ltd. (LGCLF) Q3 2023 Earnings Call Transcript