LG Electronics said on the 3rd that international credit rating agency Standard & Poor's (S&P) raised its credit rating by one notch to "BBB+" from "BBB."
It is the first time in about 12 years since 2014 that S&P has upgraded LG Electronics' credit rating. S&P also raised LG Electronics' rating outlook to "positive" from "stable" in Oct. last year.
S&P said on the 2nd (local time), "We upgraded the credit rating as we expect liability reduction and an improved financial structure driven by solid growth in core businesses." It revised the outlook to "stable" from "positive." It added, "The stable outlook reflects the expectation that LG Electronics' competitiveness in its core businesses will translate into strong free cash flow generation and liability reduction."
S&P projected, "LG Electronics' core businesses will post solid results over the next two years by strengthening competitiveness in premium products and expanding subscription and business-to-business (B2B) operations."
For its flagship home appliance business, it assessed that the company will maintain stable profitability based on its strong position in the premium market, which is relatively less affected by economic cycles. It further diagnosed that "subscription businesses that offer differentiated products and services together, and strategies targeting emerging markets based on brand image and service networks, are also accelerating growth in the home appliance business."
LG Electronics posted revenue of 23.7272 trillion won and operating profit of 1.6737 trillion won in the first quarter of this year. Those figures were up 4.3% and 32.9%, respectively, from a year earlier.
It also forecast that the media entertainment solutions business will generate modest revenue over the next 1–2 years. S&P explained, "Demand for upgrading to premium products such as large OLED TVs will support growth, and businesses based on the webOS platform are also expected to expand."
For the vehicle component solutions business, it offered the outlook that continued growth and improved profitability are expected, based on strong market positions in key product lines such as telematics and infotainment.
S&P said, "Liabilities will continue to decline under a strict financial policy," adding, "LG Electronics' liabilities-to-EBITDA (earnings before interest, taxes, depreciation and amortization) ratio will improve from 1.6 times in 2025 to 1.2 times in 2026, and to around 1.0 time in 2027."
It added that improvements in the results and financial structure of LG Display, in which LG Electronics holds 36.7% equity, also contributed to the upgrade.
Earlier this year, another international credit rating agency, Moody's, also raised LG Electronics' credit rating by one notch to Baa1 (stable) from Baa2 (positive). In May, domestic credit rating agency Korea Ratings raised LG Electronics' rating outlook to "AA positive" from "AA stable."