Oct. 13 (Bloomberg) -- LG Chem Ltd., South Korea’s biggest chemicals maker, posted third-quarter earnings that beat estimates and said full-year sales may reach a record on Chinese demand for materials used to make plastics.

Net income rose 83 percent from a year earlier to 543 billion won ($465 million), the Seoul-based company said in a statement today. That’s higher than an average estimate of 525.2 billion won in a Bloomberg News survey of eight analysts. Sales gained 5.6 percent to 3.8 trillion won in the three months ended Sept. 30 and may reach 16 trillion won in 2009, Chief Executive Officer Kim Bahn Suk said at an investor briefing.

Earnings in the first nine months exceeded LG Chem’s 2008 profit as the cost of naphtha, an oil product used in petrochemicals, fell and China’s $586 billion stimulus package spurred demand. Orders from customers including Nokia OYJ and Hewlett-Packard Co. are driving sales of batteries used in mobile phones, notebook computers and cars, Kim said.

“LG Chem will easily meet the target as demand for cell- phone batteries is strong and as it starts selling car batteries,” said Cho Seung Yeon, an analyst at LIG Investment & Securities. The company started selling hybrid car batteries to Hyundai Motor Co. in July and will begin supplying General Motors Corp. next year.

Operating profit, or sales minus costs, at the electronics division, which makes batteries, more than doubled to 215.7 billion won in the third quarter. Car batteries will contribute “a lot” to overall earnings within three years, Kim said.

LG Chem shares declined 1.9 percent to close at 208,000 won, before the earnings announcement. The benchmark Kospi index dropped 0.7 percent. The stock has more than doubled this year.

Sales of Petrochemicals

The petrochemicals division, which accounts for about 70 percent of the company’s revenue, posted a 63 percent gain in operating profit in the quarter.

The price difference between naphtha and polyvinyl chloride, or PVC, used in water-resistant fabrics and window frames, widened by 60 percent in the third quarter from a year earlier, according to Mirae Asset Securities Co.

Sales growth may slow by value in the fourth quarter as prices of petrochemicals may decline on new capacities from China and supplies from the Middle East, James Kim, an analyst at KB Investment & Securities Co, said in a report on Oct. 8. He downgraded LG Chem to “hold” from “buy.”

PetroChina Co. started up a 30 billion-yuan refining and chemical complex in September, while China Petroleum & Chemical Corp.’s refining and chemical complex in Tianjin will begin operations in December, according to People’s Daily.

Operating profit rose 59 percent to 655.9 billion won in the third quarter and the full-year may exceed 2 trillion won for 2009, Kim said.

To contact the reporter on this story: Shinhye Kang in Seoul at skang24@bloomberg.net.

Last Updated: October 13, 2009 06:37 EDT