▲LG Energy Solution sales and operating profit trends (Image source: Battery Inside)

LG Ensol, 2024 Q1 sales of KRW 6.1287 trillion and operating profit of KRW 157.3 billion
Impact of slowdown in forward market demand , reflection of decline in metal price, etc.

LG Energy Solution announced at its performance briefing on the 25th that it recorded sales of KRW 6.1287 trillion (down 29.9% from KRW 8.7471 trillion in the same period last year) and operating profit of KRW 157.3 billion (down 75.2% from KRW 633.2 billion in the same period last year) in the first quarter of this year.

Operating profit is a 53.5% decrease compared to the previous quarter (338.2 billion won).

LG Energy Solution Vice President Lee Chang-sil said, “Although we actively responded to strategic customer demands and achieved double-digit sales growth for cylindrical batteries for electric vehicles, overall sales decreased by 23% compared to the previous quarter due to factors such as slowdown in upstream market demand and reflection of declining metal prices in the selling price.” He added, “Profit and loss also decreased compared to the previous quarter due to increased fixed costs such as adjustments in operating rates due to decreased market demand and the lag effect in raw material input caused by declining metal prices.”

The amount of US IRA tax deduction reflected in the operating profit for the first quarter is KRW 188.9 billion.

Some production lines due to decreased customer demand and conversion to new lines at Michigan corporation It decreased compared to the previous quarter (KRW 250.1 billion) due to the suspension.

First quarter operating profit excluding IRA Tax Credit was -31.6 billion won.

LG Energy Solution announced in a press release that despite the difficult market environment in the first quarter of 2024, it continued to invest in preparation for the future, such as expanding production facilities, and achieved significant results in new business areas.

A representative example is the GM Tennessee joint venture plant 2, which began full-scale operation in the first quarter and is operating stably. LG Energy Solution plans to gradually expand the plant's production capacity to 50 GWh, and the batteries produced will be installed in new electric vehicles based on GM's third-generation battery platform.

The Arizona plant, the second sole production plant in the U.S., has also begun full-scale construction.

The Arizona plant is expected to solidify its technological leadership in the North American market by producing the 46 series, which is attracting attention as a next-generation cylindrical battery, and LFP-based ESS, as the first cylindrical plant and the first dedicated ESS plant in North America.

We also achieved various results related to new businesses.

Last March, we discussed developing advanced BMS diagnostic solutions with Qualcomm Technologies, and our in-house independent company, KooRoo, also began full-scale business by installing approximately 200 Battery Swapping Stations in the Seoul area.

Through these new businesses, LG Energy Solution plans to secure leading ‘technology leadership’ in the service business beyond battery production and sales.

In addition, the company has further strengthened its supply chain competitiveness through achievements such as supplying 160,000 tons of LFP cathode materials to China's Sangju Liyuan and 85,000 tons of lithium concentrate to Australia's WesCEF. It has also continued its efforts to alleviate short-term financial burdens and secure competitive financing through successful corporate bond issuance and signing of a long-term lease agreement for a building in Arizona.

On this day, LG Energy Solution announced its key implementation strategies for 2024 to strengthen fundamental competitiveness.

First, we actively respond to forward demand and customer changes to increase investment and cost efficiency.

We closely examine the changes in demand for various projects currently in progress to set priorities and reasonably adjust the scale of investment and execution speed. We plan to adjust it.

In addition, we plan to seek ways to maximize the operating rate of each production facility, alleviate the burden of fixed costs, and optimize logistics and utility costs to solidify our basic strength.

The second is to secure cost competitiveness through innovation in raw material costs. The plan is to reduce material costs by expanding the direct sourcing area of raw materials such as precursors as well as major minerals such as lithium, and to improve profitability by expanding direct investment in the global supply chain.

We also actively respond to customer demands based on strong partnerships with key customers.

As of the second quarter, the Hyundai Motor Company joint venture plant in Indonesia has begun full-scale operation and is proceeding with mass production without a hitch, and the 45GWh Stellantis joint venture plant in Ontario, Canada is also scheduled to begin operation in the second half of the year.

Through this, the plan is to diversify global production bases and rationally respond to changes in demand by region and customer.

Lastly, we are expanding our lineup of new products that will lead the future market based on our overwhelming technological leadership.

The company plans to start production of the next-generation cylindrical battery 46 series at the Ochang Energy Plant and enter stable mass production of products from the third quarter. It also plans to expand supply of ESS LFP batteries, which began mass production in Nanjing, China at the end of last year, to the North American and European markets.

Kim Dong-myung, CEO of LG Energy Solution, said, “A challenging market environment is expected this year, but we will strengthen our fundamental competitiveness and steadily realize differentiated customer value to solidify the foundation for overwhelming technological leadership.”