SEOUL, South Korea, July 27, 2023 /PRNewswire/ -- LG Energy Solution (LGES; KRX: 373220) today announced its second quarter earnings, posting steady quarterly revenue growth, as well as strong performance in the first half-year.
Despite potential impact of market uncertainties surrounding the EV / battery sectors, the company also revised its 2023 growth target to mid-30 percent increase year-on-year in annual revenue, which is up from the previous target of 25 to 30 percent growth announced in January.
LGES posted consolidated revenue of KRW 8.774 trillion for 2Q, marking a 0.3 percent increase from its highest quarterly record reported in the first quarter, and a 73 percent increase year-on-year. "Increased shipments to North America thanks to its robust EV market led the revenue growth this quarter," explained Chang Sil Lee, CFO of LG Energy Solution, "even if demands in Europe relatively declined, and the average selling price (ASP) decreased due to falling metal prices."
The company's second quarter operating profit recorded at KRW 461 billion, a 27 percent decrease quarter-on-quarter and a 136 percent increase year-on-year. The figure, which includes the estimated IRA tax credit amount of KRW 110.9 billion, is about KRW 150 billion lower than the company's preliminary earnings number announced earlier this month. This was due to one-off provisioning of KRW 151 billion caused by inflated costs of material expenses for the ongoing Chevrolet Bolt EV recall process.
"In addition to the one-off cost related to the recall, the increased costs of metal expenses from lagging consumption of raw material inventories also affected our bottom line," said Chang Sil Lee. "However, we consistently improved productivity, as well as cost-efficiency for business operations including logistics, and accordingly, when the one-off factor is excluded, the operating profit margin saw a significant improvement year-on-year."
LGES also shared its first half-year performance, highlighting its strong financial results based on the increasing global EV demand, mainly led by the U.S. market growth.
According to SNE Research, global EV sales[1] from January to May this year increased by 43 percent from the same period last year, reaching 4.85 million vehicles. Particularly, U.S. EV sales have shown the highest year-on-year growth of 54.1 percent, rolling out 560,000 EVs.
By enhancing its production network, customer portfolio, and supply chain in the U.S., as well as capitalizing on the favorable market environment, LGES's first half-year revenue amounted to KRW 17.5 trillion, an 86 percent increase year-on-year. Such accomplishment was possible thanks to the steady ramp-up at GM JV (Ultium Cells) plant in Ohio and the increase in sales of EV cylindrical batteries.
In the same period, the company has also successfully reinforced its profitability through yield and cost innovation, and diversifying its supply chains by investing in upstream suppliers and securing long-term purchase agreements. As a result, LGES recorded the operating profit of KRW 1.1 trillion[2], marking a 140 percent increase from the previous year, and the order backlog of KRW 440 trillion in the first half of 2023.
Continuing on from its first half-year achievements, LGES now aims to secure sustainable market competitiveness and industry leadership amid the expected declines in EV demands and metal pricing.
Global EV demand forecasts were adjusted downwards in all markets except for the U.S. While the U.S. EV market will continue to grow, demands in Europe and China are expected to be lower than previous estimate. Also, metal prices including lithium are down over 50% from its peak this year, which is expected to be reflected into the average selling prices mainly from the second-half.
To counter these external uncertainties, LGES will focus on its mid- to long-term strategic initiatives geared toward securing persisting competitiveness in products, operation, and sourcing.
Based on LGES's product competitiveness and diverse customer portfolio, along with the mid- to long-term projection that EV market will quintuple by 2030, LGES's full year revenue for 2023 is expected to grow over mid-30 percent year-on-year with continuous improvement in profit margin.
"Despite some uncertainties expected in the second-half, we're well positioned to ride out such challenges, as we have already secured solid customer base and product portfolio through our long devotions to product competitiveness and operational expertise," said Youngsoo Kwon, CEO of LG Energy Solution. "We will continue on with our great performance in the first half-year and further reinforce our profitability, thereby leading the global trend of electrification with our world-best quality products."
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 25,000 patents. Its robust global network, which spans North America, Europe, Asia, and Australia, includes battery manufacturing facilities established through joint ventures with major automakers such as General Motors, Stellantis N.V., Hyundai Motor Group, and Honda Motor Co., Ltd. At the forefront of green business and sustainability, LG Energy Solution aims to achieve carbon neutral operations 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] EV: including battery electric vehicles (BEV) and plug-in hybrid electric vehicles (PHEV) [２] The first half-year operating profit includes the estimated IRA tax credit of KRW 211 billion. |
