• LG Energy Solution posts KRW 6.1619 trillion in consolidated revenue and KRW 195.3 billion in operating profit
  • Despite continued EV demand slowdown, the company makes meaningful progress in EV and ESS battery businesses, and enhances its fundamental competitiveness in supply chain and R&D
  • In response to slower-than-expected EV market growth, LG Energy Solution to focus on optimizing operation and improving profitability, while continuing to pursue technological and cost competitiveness

SEOUL, South Korea, July 24, 2024 /PRNewswire/ -- LG Energy Solution (KRX: 373220) today announced its second quarter earnings, along with its business achievements and key action plans to counter slower-than-expected EV market growth.

The company posted consolidated revenue of KRW 6.1619 trillion, a 0.5 percent increase quarter-on-quarter and 29.8 percent decrease year-on-year. The operating profit was KRW 195.3 billion, a 24.2 percent increase quarter-on-quarter and 57.6 percent decrease year-on-year, with operating profit margin of 3.2 percent.

"EV demand slowdown and the impact of declining metal prices on average selling price (ASP) continued through this quarter," said Chang Sil Lee, CFO of LG Energy Solution. "However, the revenue slightly increased quarter-on-quarter, thanks to increased shipments in response to new EV model launch by customers and revenue growth from ESS batteries for power grids."

"The operating profit was affected by fixed cost burden due to utilization rate adjustment," Lee said. "However, the IRA tax credit effect more than doubled from the previous quarter thanks to increased volume in North America, driving a 24.2 percent quarter-on-quarter increase in operating profit."

The operating profit includes the estimated IRA tax credit amount of KRW 447.8 billion. Excluding the IRA tax credit, the company would have recorded quarterly operating loss of KRW 252.5 billion.

  • 2Q Progress: Business achievements and enhanced fundamental strengths

Despite ongoing global EV demand slowdown and subsequent market uncertainties, LG Energy Solution continued its venture into more diverse product lineup, successfully landing new supply agreements in both EV and ESS battery businesses.

The company signed off its first large-scale (39GWh) supply agreement for LFP[1] batteries with Renault Group's Ampere, a meaningful achievement in the LFP segment that is currently dominated by Chinese battery manufacturers. LG Energy Solution also reaffirmed its technological leadership through this agreement, as it became first in the world to apply cell-to-pack (CTP) technology to a pouch form factor.

The company also started successful mass production and shipment from its joint venture plant with Hyundai Motor Group in Indonesia, adding another EV battery production hub in Asia for a proactive response to rapidly-growing EV demands in the region.

The company also made significant progress in its ESS battery business, as it secured a large-scale supply agreement for power grids in Arizona (4.8GWh). Capitalizing on its expertise as a comprehensive solution provider, LG Energy Solution will deliver a total ESS solution including system integration (SI) from LG Energy Solution Vertech, Inc., offering differentiated customer value.

Along with business achievements, the company also concentrated on heightening its fundamental competitiveness. LG Energy Solution further reinforced its raw material supply chain by successfully securing lithium spodumene through offtake and investment agreements with a lithium producer with mines in Australia.

The company also drew achievements in battery-related technologies, including developing AI algorithms for cell designs that are optimized to customer needs. It also signed an MoU with Analog Devices, Inc. on advancing cell temperature measurement technology.

  • Key action plans to counter slower EV market growth

In response to slow EV market growth, LG Energy Solution revised down its annual guidance, with its annual consolidated revenue now expected to decrease by more than 20 percent from last year. The company also lowered this year's expected capacity eligible for the IRA tax credit from 45~50GWh to 30~35 GWh, due to adjustments in ramp-up speed in response to changing customer demands.

Despite unfavorable market environment expected in the second-half of the year, the company is looking forward to a meaningful increase in shipments, in line with the rising demand in North America and Europe thanks to new EV model launches. It also expects increased revenue from pouch-type mobility & IT batteries due to customers' demands for premium batteries. ESS battery business is expected to benefit from increased sales from power grid projects.

At the same time, to counter continued market uncertainties, LG Energy Solution will prioritize optimizing operation and improving profitability. The company will maximize the utilization rate at each site by adjusting ramp-up speed, scaling down investment, and converting existing lines for other applications. Moreover, it will execute capex based on strategic priorities.

Also, the company will secure competitive edges in both products and future technologies. It will first establish differentiated product portfolio by launching 4680 cells and expanding the production of ESS LFP batteries. At the same time, the company will accelerate the development of future battery technologies by setting up pilot lines for dry electrode production in its facility in Ochang, Korea.

Lastly, the company will stay committed to improving cost competitiveness by expanding the scope of direct sourcing from critical minerals to precursors and increasing investment in upstream suppliers. It will also continue to enhance production efficiency by simplifying production processes and advancing smart factory technologies.

"Despite experiencing more headwinds than previously expected, we will remain agile through transitions and establish strong fundamental competitiveness, delivering differentiated values to our customers," said David Kim, CEO of LG Energy Solution. "With these efforts, we aim to solidify our position as a front-runner leading the future of battery industry."

About LG Energy Solution

LG Energy Solution (KRX: 373220), a split-off from LG Chem, is a leading global manufacturer of lithium-ion batteries for electric vehicles, mobility, IT, and energy storage systems. With 30 years of experience in revolutionary battery technology and extensive research and development (R&D), the company is the top battery-related patent holder in the world with over 58,000 patents. Its robust global network, which spans North America, Europe, and Asia, includes battery manufacturing facilities established through joint ventures with major automakers. Committed to building sustainable battery ecosystem, LG Energy Solution aims to achieve carbon neutrality across its value chain by 2050, while embodying the value of shared growth and promoting diverse and inclusive corporate culture. To learn more about LG Energy Solution's ideas and innovations, visit https://news.lgensol.com.

[1] LFP: lithium, iron, phosphate

 

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