LG Electronics outlook revised to positive by S&P on improving metrics

Investing.com -- S&P Global Ratings revised its outlook on LG Electronics to positive from stable, while affirming its ’BBB’ rating, citing improving financial metrics and strong operating performance.

The credit rating agency expects LG Electronics’ creditworthiness to improve due to strong performance in its home appliance business and better business conditions at LG Display. These factors should help the company generate significant free cash inflow in coming years.

S&P forecasts LG Electronics’ adjusted debt-to-EBITDA ratio will improve to 1.5x in 2025 and 1.3x in 2026, compared with 1.7x in 2024 and 2.0x in 2023.

The company’s mainstay businesses are expected to maintain robust operating performance. LG Electronics has established itself as a global leader in premium home appliances, maintaining steady margins despite volatile economic conditions.

Its heating, ventilation and air-conditioning (HVAC) segment is projected to see structural growth in both Korean domestic and global markets, driven by cooling systems for data centers and energy-efficient systems for eco-friendly buildings.

The vehicle solutions business profitability is likely to improve due to a favorable shift in the order backlog, which stood at approximately Korean won (KRW) 100 trillion as of end-June 2025.

A turnaround in LG Display’s financial standing will support LG Electronics’ financial profile. Despite a weak performance in the first half of 2025 with an operating loss of KRW83 billion, S&P expects LG Display to achieve an operating profit of about KRW710 billion in 2025 and KRW720 billion in 2026, compared with losses of KRW561 billion in 2024 and KRW2.5 trillion in 2023.

The improvement is attributed to LG Display’s exit from unprofitable LCD panels and increasing supply of OLED panels to major customers. LG Display sold its Guangzhou fab in April 2025, exiting the LCD panel business.

Proceeds from the IPO of LG Electronics India will boost the parent company’s financial profile, with more than KRW1.8 trillion of cash inflow expected. A portion of these proceeds will likely be used for expansion of its India operations.

S&P estimates that about 20% of LG Electronics’ revenue exposure is to the U.S. The agency does not expect U.S. tariffs to have a material impact on the company’s profitability given its capacity to optimize production and pass on additional costs through price increases.

Weak performance of LG Electronics’ TV division remains a concern. The media solutions division reversed to significant losses in the second quarter of 2025 due to stagnant demand and intensifying competition.

S&P may raise the rating if LG Electronics continues its financial improvement with robust performances in core businesses and maintains a disciplined financial policy, with an adjusted debt-to-EBITDA ratio staying close to or below 1.5x on a sustained basis.

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