LG Energy Solution held a performance briefing on the morning of the 27th, announcing that it achieved a revenue of 8.77 trillion won and an operating profit of 460.6 billion won in the second quarter of 2023.

Revenue increased by 73% compared to the same period last year (5.07 trillion won) and by 0.3% compared to the previous quarter (8.75 trillion won), marking the highest revenue for a single quarter. Since its listing on the stock market in January last year, LG Energy Solution has seen sales growth for six consecutive quarters.

The operating profit of 460.6 billion won represents a 135.5% increase compared to the same period last year (195.6 billion won) but a decrease of 27.3% compared to the previous quarter (633.2 billion won). This operating profit includes a tax credit amount of 110.9 billion won under the U.S. IRA (Inflation Reduction Act), which is 151 billion won lower than the preliminary result (611.6 billion won) announced earlier this month.

LG Energy Solution explained that the decrease was due to an additional one-time provision of 151 billion won reflecting the increase in material costs that occurred during the GM recall process, according to an agreement with its clients.

Lee Chang-sil, CFO of LG Energy Solution, stated, “The operating profit was slowed down from the previous quarter due to a temporary increase in manufacturing costs caused by the timing of metal price reflections and the GM recall cost provision. However, we continue to maintain a stable trend, with operating profit margin, excluding one-time costs, significantly improving compared to the same period last year through continuous productivity improvement and cost efficiency.”

Indeed, LG Energy Solution has been maintaining a solid performance trend. For the first half of the year, it recorded revenues of 17.52 trillion won and an operating profit of 1.0938 trillion won, reflecting an 86.1% increase in revenue and a 140.7% increase in operating profit compared to the same period last year.

The strengthening of its differentiated business competitiveness strategy amid the surge in global electric vehicle demand centered on the U.S. played a major role in the first-half performance. Analyzing the global electric vehicle sales from January to May of this year, the U.S. electric vehicle market showed a steep growth rate of 54.1% compared to the same period last year, outperforming China (47.3%) and Europe (23.9%).

Additionally, factors contributing to the performance in the first half include ▲stable mass production at the GM joint plant ▲increased sales of EV cylindrical batteries ▲profitability improvements based on yield and cost innovations ▲diversification of the supply chain through upstream investments and long-term purchase contracts.

LG Energy Solution anticipates increased external uncertainty in the second half of the year due to a slowdown in demand from upstream industries and fluctuations in raw material prices.

In fact, the 2023 electric vehicle sales outlook has been adjusted downward across all regions except North America, with Europe projected at 3.9% and China at 0.6%. Furthermore, the significant drop in metal prices during the first half of the year is expected to be fully reflected in sales prices during the second half, impacting revenue growth.

Despite this challenging external environment, LG Energy Solution is committed to securing sustainable competitiveness through a long-term strategic perspective. To do this, they plan to actively push for competitiveness enhancement strategies in three areas: ▲Product ▲Global Production Facility Operations ▲Raw Material Sourcing.

Firstly, to enhance product competitiveness, they will develop and mass-produce customized products for target markets. They plan to establish a production line for 4680 cylindrical batteries at the Ochang Energy Plant within the year and convert part of the ESS line at their Nanjing plant in China to LFP. Additionally, they will expand their product portfolio with mid-nickel, manganese-rich, and LFP products to boost product competitiveness in specific markets.

They will also accelerate expanding production capacity based on partnerships with major automakers and establishing smart factories. They aim to construct new projects such as joint plants with the Hyundai Motor Group without interruption and stabilize global production facility operations early through smart factory implementation.

To ensure stable raw material procurement, they are actively pursuing localization of their supply chain. Furthermore, they plan to establish a resource circulation system at each production base to strengthen their market dominance in the recycling and reuse of waste batteries.

LG Energy Solution announced that through this differentiated product competitiveness and securing customer portfolios, they aim to achieve over 30% revenue growth compared to last year. As of the end of June, LG Energy Solution reported a backlog of orders totaling 440 trillion won.

Lee Kyung-soo, CEO of LG Energy Solution, stated, “We achieved meaningful outcomes through efforts to improve productivity, including the construction of joint plants with leading automakers and establishing smart factories in the first half. We will continue to provide unparalleled customer value in the second half through our strong order backlog and exceptional product competitiveness.”

Jin Sang-hee daedusj@autodiary.kr