LG Energy Solution achieved a revenue of 33.7455 trillion Korean won and an operating profit of 2.1632 trillion Korean won for the past year. This represents a 31.8% increase in revenue compared to the previous year (25.5986 trillion Korean won) and a 78.2% increase in operating profit (1.2137 trillion Korean won).
CFO Lee Chang-sil mentioned during the earnings conference on the 26th, “Our revenue has shown a solid growth trend, responding actively to demand growth in the North American region, achieving over 30% growth for the second consecutive year, and our operating profit also increased by 78% compared to last year due to cost-cutting efforts such as logistics cost reduction, yield, and productivity improvements, as well as benefits from the IRA Tax Credit.”
Last year marked a significant expansion for LG Energy Solution in the North American market, which is expected to experience the steepest growth in the future.
Lee emphasized, “We continued our efforts to enhance production capabilities in North America, such as the stable mass production of the GM JV 1 plant and the construction of cylindrical and ESS plants in Arizona, and we strengthened our customer portfolio by establishing a joint venture with Hyundai Motor Group to produce about 30GWh and signing a supply contract of 20GWh with global leader Toyota.”
“We also achieved significant results in building a stable supply chain by expanding IRA-eligible sourcing of minerals within the U.S. FTA area and enhancing strategic collaborations with key partners by region,” he added.
In the fourth quarter of last year, LG Energy Solution recorded revenues of 8.014 trillion won and an operating profit of 338.2 billion won. Compared to the previous quarter (8.2235 trillion won) and the same period last year (8.5375 trillion won), revenue decreased by 2.7% and 6.3%, respectively. Operating profit decreased by 53.7% from the previous quarter (731.2 billion won) but increased by 42.5% from the same period last year (237.4 billion won).
The amount reflecting the U.S. IRA Tax Credit in the fourth quarter operating profit was 250.1 billion won, which is a 16% increase compared to the previous quarter due to stable mass production at local production facilities. Excluding the IRA Tax Credit, the operating profit for the fourth quarter was 88.1 billion won.
Looking ahead, LG Energy Solution expects the electric vehicle market to grow by about mid-20% this year.
The growth rate in North America, which led the global electric vehicle market last year (approximately 57% in ’23), is projected to slow to the mid-30% range this year, indicating a temporary deceleration in the overall market growth, which has consistently exceeded 30% in recent years.
However, LG Energy Solution remains optimistic, emphasizing, “There are still opportunities that allow us to sustain our growth momentum.”
Specifically, they cited that aggressive price reductions by automakers due to weak demand in the electric vehicle market and the launch of affordable models are expected to have a positive impact on consumer purchasing sentiment. The prolonged decline in metal prices is also anticipated to ease OEMs’ battery price burdens, leading to a demand for battery restocking in the future.
Moreover, they foresee this situation as an opportunity to enhance their competitiveness. The current market conditions may optimize the early-mover advantage of LG Energy Solution, which is proactively operating and constructing eight production facilities in the high-growth North American market, and could provide an opportunity to differentiate their technological leadership.
Amid the political uncertainties like the U.S. presidential elections, the global trend toward carbon neutrality and the diffusion of electric vehicles continue. Additionally, region-specific localization policies for supply chains, like the U.S. IRA and Europe CRMA, also represent opportunities for LG Energy Solution, which has established diversified supply chains.
On that day, LG Energy Solution also announced its key initiatives to turn this temporary crisis into a stepping stone for greater leaps, focusing on ▲ building technological leadership ▲ securing cost competitiveness ▲ preparing for future businesses.
Firstly, they plan to build a technological leadership that overwhelms competitors. They will enhance the capabilities of their premium high-nickel (High-Ni) NCMA products to maintain a competitive edge and accelerate the development of mid-nickel (Mid-Ni) NCM and LFP battery technologies for penetrating the mid-low price market. In the small battery sector, they aim to secure market leadership through the mass production of 46-series batteries starting in the second half of this year. They will also intensify the market supply of LFP products that began production at the end of last year in the ESS business and expand their integrated solution business.
Secondly, they intend to establish structural cost competitiveness that withstands external risks. By expanding direct sourcing of raw materials, transitioning key materials through technological development, and strengthening direct investments in the supply chain, they will enhance fundamental cost competitiveness. Moreover, they aim to improve productivity and quality based on smart factory technology to reduce fixed costs and rationalize operating costs such as logistics and utilities.
Finally, they will also accelerate preparations for future industries aimed at sustainable growth. They plan to focus on next-generation battery development with the goal of mass production of lithium-sulfur batteries by 2027. Additionally, they will hasten the development of dry electrodes, which have advantages in energy density and cost, and will begin mass production of new stacking technology-based products this year.
On that day, LG Energy Solution projected, “We expect revenue in 2024 to grow in the mid-single-digit range.”
Investment in production facilities is planned to proceed at a similar scale to the previous year (approximately 10.9 trillion won). They will focus on preparing for the expansion of production bases in North America, such as the GM JV2 plant and joint plants with Stellantis, Honda, and Hyundai, which will become new growth drivers when demand recovers, while executing investment expenses efficiently and flexibly according to market conditions.
This year, the scale of IRA Tax Credit benefits is expected to be at least double compared to the previous year, around 45-50GWh.
LG Energy Solution CEO Kim Dong-myung stated, “This year will be the starting point for the ‘LG Energy Solution 2.0 Era’ based on strengthening fundamental competitiveness, such as technological leadership and realizing differentiated customer value,” adding, “We will establish a solid business structure and a foundation for sustainable growth based on qualitative immersion.”
Lee Sang-jin daedusj@autodiary.kr