LG Energy Solution, Operating Profit Plummets but Raises Full-Year Sales Target to 22 Trillion Won

Q2 Earnings Announcement "Raw Material Price Increase Not Reflected in Selling Price"
Dual Form Factor Operation Centered on Pouch and Cylindrical Types

[Image source=Yonhap News]

[Asia Economy Reporter Oh Hyung-gil] LG Energy Solution's operating profit for the first half of the year has been halved compared to the previous year. It was found that profitability declined due to the timing difference in reflecting recent raw material price increases in sales prices.

However, with new car launches by customers continuing in the second half, battery sales are expected to increase, leading to an upward revision of the annual sales target to 22 trillion won.

LG Energy Solution announced on the 27th that its second-quarter sales amounted to 5.0706 trillion won, and operating profit was 195.6 billion won, down 1.2% and 73.0% respectively compared to the same period last year. Cumulative sales for the first half reached 9.4129 trillion won, a slight increase of 0.3% from the previous year. Cumulative operating profit recorded 454.5 billion won, down 57.3% from the same period last year.

Sales increased due to the linkage of raw material prices to selling prices and expanded sales, but profitability declined due to China's COVID-19 lockdown measures and logistics disruptions. However, it was explained that the decrease in second-quarter operating profit is not significant when excluding one-time items such as last year's license fee settlements and provisions.

Additionally, LG Energy Solution disclosed its mid- to long-term strategic directions covering business operations in North America, Europe, and Asia, as well as form factor management.

In the North American market, the focus is on pouch-type batteries through joint ventures with companies like GM, while cylindrical batteries will expand supply to existing customers such as Tesla and electric vehicle startups. In the European market, the strategy is to secure new cylindrical battery production bases in addition to the existing pouch-type production base in Poland. For the Asian region, customer acquisition will be pursued through new production bases outside China.

In particular, a dual form factor centered on pouch and cylindrical types will be operated. For pouch-type batteries, premium products will be developed by applying single-particle NCMA cathode materials and silicon anode materials, while also promoting the development of cost-competitive mass-market products. For cylindrical batteries, early acquisition of mass production technology for the new '4680' form factor will be secured.

Furthermore, within five years, efforts will be made to improve yield and stabilize quality, enhance processes and productivity, and optimize workforce efficiency through strengthening quality capabilities and building smart factories.

To secure raw materials, direct investments and long-term supply contracts will be increased, and cooperation with major companies will be expanded to establish a battery recycling system. Plans were also announced to enter new battery-related businesses such as Battery-as-a-Service (BaaS) and Energy-as-a-Service (EaaS) aimed at improving energy efficiency.

An LG Energy Solution official stated, "Based on the expansion of joint ventures in North America and the increased supply of cylindrical batteries, we plan to pursue more than triple sales growth within the next five years through continuous discovery of new business opportunities," adding, "We will strengthen quality and manufacturing capabilities to achieve double-digit operating profit margins."