Score Motion: Moody’s upgrades LG Electronics to Baa2; outlook stableGlobal Credit score Analysis – 19 Feb 2021Hong Kong, February 19, 2021 — Moody’s Traders Service has upgraded the issuer score of LG Electronics Inc. (LGE) to Baa2 from Baa3. Moody’s has additionally upgraded the senior unsecured score on LGE’s medium-term observe program to (P)Baa2 from (P)Baa3.The score outlook stays steady.”The improve displays our expectation that, following a big enchancment in 2020, LGE’s monetary profile will stay stable over the subsequent 1-2 years, pushed by its regular gross sales and profitability, and the improved working efficiency of its 37.9%-owned affiliate LG Show Co., Ltd. (LGD),” says Gloria Tsuen, a Moody’s Vice President and Senior Credit score Officer.RATINGS RATIONALELGE’s Baa2 scores mirror its well-recognized model and robust market positions within the international house equipment and TV segments, in addition to its wholesome steadiness sheet. On the identical time, the scores think about the lingering weak spot in LGE’s cell enterprise and average profitability.The scores additionally mirror the credit score high quality of LGE’s affiliate LGD and the chance of LGE receiving monetary assist from its mum or dad — LG Corp — if crucial, given LGE’s excessive significance to the group and its mum or dad’s stable steadiness sheet and web money place.LGE’s gross sales have been steady in 2020 at KRW63 trillion, whereas its reported working margins rose to five.1% in 2020 from 3.9% in 2019, pushed by the corporate’s concentrate on differentiated and higher-margin merchandise. The advance additionally displays elevated demand for house equipment and TV upgrades, and for merchandise with further features similar to hygiene amid the pandemic.Moody’s expects LGE’s working revenue will stay regular over the subsequent two years, which, together with its manageable capital spending implies that the corporate’s debt ranges will step by step lower.As well as, LGE’s earnings and enterprise profile are doubtless to enhance additional if the corporate exits its loss-making cell enterprise.Moody’s expects LGD’s monetary leverage, after having peaked in 2019 due to massive capital spending and weak earnings, to proceed to enhance in 2021 and 2022 as its complete debt stays largely steady whereas earnings improve. The corporate’s capital spending considerably declined in 2020 and can stay average, whereas its working revenue will proceed to enhance within the subsequent 12-18 months, pushed primarily by a ramp up within the gross sales of OLED merchandise to TV and smartphone producers, and continued energy in its IT section.In consequence, Moody’s expects LGE’s leverage (together with the professional rata consolidation of LGD) will lower additional to round 2.0x within the subsequent 12-18 months, from 2.3x and a pair of.9x in 2020 and 2019 respectively. These ratios assist LGE’s Baa2 scores.LGE’s liquidity stays wonderful. Its money and money equivalents of round KRW5.9 trillion as of the top of 2020 are greater than ample to cowl its KRW1.2 trillion of short-term debt. The corporate additionally has sturdy entry to the home funding markets.When it comes to environmental, social and governance (ESG) elements, the scores think about LGE’s prudent monetary coverage, as evidenced by its average dividend payouts and low urge for food for M&A actions.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe score outlook is steady, reflecting Moody’s view that the corporate’s revenue margins and monetary leverage will stay regular over the subsequent 12-18 months.LGE’s scores could possibly be upgraded if (1) the corporate maintains its reported working margin above 7%-8%; (2) its adjusted debt/ EBITDA, together with the professional rata consolidation of LGD, is maintained beneath 1.5x; and (3) LGE and LGD keep enough steadiness sheet liquidity.The scores could possibly be downgraded if LGE’s market place weakens because of intense competitors. Credit score metrics indicative of a downgrade embrace (1) LGE’s reported working margin declining to beneath 3%-4%, or (2) its adjusted debt/EBITDA, together with the professional rata consolidation of LGD, rising above 3.0x.The principal methodology utilized in these scores was Client Durables Business printed in April 2017 and accessible at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1060509. Alternatively, please see the Score Methodologies web page on www.moodys.com for a duplicate of this system.LG Electronics Inc. is a number one shopper electronics firm that makes diversified merchandise, together with fridges, washing machines, air conditioners, TVs, cell phones and car parts.LG Show Co., Ltd. is a number one producer of thin-film transistor liquid crystal show (LCD) and natural light-emitting diode (OLED) panels.REGULATORY DISCLOSURESFor additional specification of Moody’s key score assumptions and sensitivity evaluation, see the sections Methodology Assumptions and Sensitivity to Assumptions within the disclosure kind. Moody’s Score Symbols and Definitions could be discovered at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For scores issued on a program, sequence, class/class of debt or safety this announcement offers sure regulatory disclosures in relation to every score of a subsequently issued bond or observe of the identical sequence, class/class of debt, safety or pursuant to a program for which the scores are derived solely from current scores in accordance with Moody’s score practices. For scores issued on a assist supplier, this announcement offers sure regulatory disclosures in relation to the credit standing motion on the assist supplier and in relation to every explicit credit standing motion for securities that derive their credit score scores from the assist supplier’s credit standing. For provisional scores, this announcement offers sure regulatory disclosures in relation to the provisional score assigned, and in relation to a definitive score that could be assigned subsequent to the ultimate issuance of the debt, in every case the place the transaction construction and phrases haven’t modified previous to the project of the definitive score in a fashion that may have affected the score. For additional info please see the scores tab on the issuer/entity web page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit score assist from the first entity(ies) of this credit standing motion, and whose scores might change because of this credit standing motion, the related regulatory disclosures will probably be these of the guarantor entity. Exceptions to this method exist for the next disclosures, if relevant to jurisdiction: Ancillary Providers, Disclosure to rated entity, Disclosure from rated entity.The scores have been disclosed to the rated entity or its designated agent(s) and issued with no modification ensuing from that disclosure.These scores are solicited. Please seek advice from Moody’s Coverage for Designating and Assigning Unsolicited Credit score Rankings accessible on its web site www.moodys.com.Moody’s considers a rated entity or its agent(s) to be taking part when it maintains an total relationship with Moody’s. Except famous within the Regulatory Disclosures as a Non-Collaborating Entity, the rated entity is taking part and the rated entity or its agent(s) typically offers Moody’s with info for the needs of its scores course of. Please seek advice from www.moodys.com for the Regulatory Disclosures for every credit standing motion underneath the scores tab on the issuer/entity web page and for particulars of Moody’s Coverage for Designating Non-Collaborating Rated Entities.Regulatory disclosures contained on this press launch apply to the credit standing and, if relevant, the associated score outlook or score overview.Moody’s common rules for assessing environmental, social and governance (ESG) dangers in our credit score evaluation could be discovered at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The World Scale Credit score Score on this Credit score Score Announcement was issued by one in every of Moody’s associates outdoors the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Essential 60322, Germany, in accordance with Artwork.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit score Score Companies. Additional info on the EU endorsement standing and on the Moody’s workplace that issued the credit standing is offered on www.moodys.com.The World Scale Credit score Score on this Credit score Score Announcement was issued by one in every of Moody’s associates outdoors the UK and is endorsed by Moody’s Traders Service Restricted, One Canada Sq., Canary Wharf, London E14 5FA underneath the legislation relevant to credit standing businesses within the UK. Additional info on the UK endorsement standing and on the Moody’s workplace that issued the credit standing is offered on www.moodys.com.Please see www.moodys.com for any updates on modifications to the lead score analyst and to the Moody’s authorized entity that has issued the score.Please see the scores tab on the issuer/entity web page on www.moodys.com for extra regulatory disclosures for every credit standing.The primary identify beneath is the lead score analyst for this Credit score Score and the final identify beneath is the particular person primarily chargeable for approving this Credit score Score. Gloria Tsuen, CFA VP – Senior Credit score Officer Company Finance Group Moody’s Traders Service Hong Kong Ltd. 24/F One Pacific Place 88 Queensway Hong Kong China (Hong Kong S.A.R.) 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