Last Year Sales of 33.7455 Trillion KRW and Operating Profit of 2.1632 Trillion KRW
Record High... Up 32% and 78% Respectively from Previous Year
EV Market Slow but Growth Momentum and Opportunity Factors Remain
LG Energy Solution expects its sales to falter until the first quarter but gradually recover from the second quarter onward this year.
On the 26th, during a conference call following the announcement of its fourth-quarter results last year, LG Energy Solution stated, "Sales in the first quarter will slightly decline compared to the previous quarter due to weak battery demand and falling prices of key metals such as lithium, but we expect a gradual recovery starting from the second quarter."
Regarding the reasons, the company explained, "Starting this year, the Inflation Reduction Act (IRA) subsidies will be provided to consumers purchasing electric vehicles in the U.S., and new vehicle lineups from customers are scheduled to launch in the first half of the year, which will act as positive factors." Since the second half of last year, as electric vehicle demand has continued to weaken, LG Energy Solution's sales have declined for two consecutive quarters since reaching KRW 8.7735 trillion in the second quarter of last year.
Investment in production facilities will be carried out at a scale similar to the previous year (approximately KRW 10.9 trillion). Regarding the timing of mass production at major plants, the company said, "In the first quarter of this year, mass production will begin for the second GM joint venture (JV), and in the first half of the year, mass production will start at the Hyundai Motor Indonesia JV." It added, "After 2025, the third GM JV, Stellantis JV, Honda JV, and North American Hyundai Motor JV are scheduled." It also mentioned plans to expand the standalone Michigan plant and build cylindrical battery and ESS plants in Arizona.
LG Energy Solution Headquarters, Yeoui-daero, Yeongdeungpo-gu, Seoul. Photo by Jinhyung Kang aymsdream@
IRA Tax Credit Benefits This Year Expected to More Than Double Compared to Last Year
LG Energy Solution is implementing a 'competitive dual supply chain construction' strategy to diversify its supply chain. During the conference call, the company stated, "For products targeting the U.S., we are establishing cooperation with partners to meet the Foreign Entity of Concern (FEOC) requirements under the IRA, while for regions outside the U.S., we will enhance cost competitiveness and strengthen supply responsiveness."
It added, "We plan to concretize discussions with partners on localizing production of separators and electrolytes, which require U.S. localization," and "We will strengthen sourcing competitiveness for critical minerals from Korea, Indonesia, Australia, Chile, and other countries to meet IRA subsidy requirements."
The IRA tax credit amount reflected in last year's operating profit was KRW 677 billion. LG Energy Solution expects the annual benefit from IRA tax credits to reach around 45?50 GWh this year, more than double the previous year, as it begins to reflect sales from the second GM JV mass production volume.
LG Energy Solution began producing cylindrical 46-series batteries in the second half of this year. The company said, "Production started at the Ochang plant in Cheongju, Chungbuk Province," and added, "Production will also take place at the Arizona cylindrical battery plant in the future to expand the demand base."
Sales Surpass KRW 30 Trillion and Operating Profit Exceeds KRW 2 Trillion for the First Time Since Company Launch in 2020
The company also held a briefing on last year's performance. Lee Chang-sil, Chief Financial Officer (CFO, Vice President), said, "We secured North American production capabilities through stable mass production at the first GM JV plant and construction of the Arizona cylindrical battery and ESS plants," and added, "We also solidified our customer portfolio by establishing a JV with Hyundai Motor Group with a capacity of about 30 GWh and signing a supply contract with global leader Toyota for 20 GWh."
Regarding the record-high performance last year with sales of KRW 33.7455 trillion and operating profit of KRW 2.1632 trillion, he explained, "Sales grew over 30% for two consecutive years by responding to demand in the North American region, and operating profit increased due to cost improvements such as logistics cost reduction, yield and productivity enhancements, and benefits from IRA tax credits." Surpassing KRW 30 trillion in annual sales and KRW 2 trillion in operating profit is a first since the company's launch in 2020.
Sales in the fourth quarter last year were KRW 8.014 trillion, and operating profit was KRW 338.2 billion. Sales decreased by 2.7% and 6.3% compared to the previous quarter (KRW 8.2235 trillion) and the same quarter last year (KRW 8.5375 trillion), respectively. Operating profit fell 53.7% from the previous quarter (KRW 731.2 billion) but increased 42.5% compared to the same quarter last year (KRW 237.4 billion).
The IRA tax credit amount reflected in the fourth-quarter operating profit was KRW 250.1 billion. This increased by 16% compared to the previous quarter due to stable mass production at U.S. local production facilities. Excluding the IRA tax credit, the fourth-quarter operating profit was KRW 88.1 billion.
"Turning Temporary Crisis into a Launchpad"... Announcement of Key Plans to Focus on Competitive Advantages
LG Energy Solution forecasts that the electric vehicle market will grow by about the mid-20% range this year. This indicates a temporary slowdown in the overall market growth rate, which had exceeded 30% annually.
Regarding this year's performance outlook, LG Energy Solution said, "We expect a mid-single-digit increase in sales compared to the previous year through expanded sales in the North American region."
On this day, LG Energy Solution also announced key plans to turn the temporary crisis into a greater leap forward by focusing on ▲building technological leadership ▲securing cost competitiveness ▲preparing for future businesses.
The company plans to enhance capabilities in premium high-nickel NCMA (Nickel-Cobalt-Manganese-Aluminum) products and accelerate the development of high-voltage mid-nickel NCM (Nickel-Cobalt-Manganese) and LFP (Lithium Iron Phosphate) battery technologies to target the mid-to-low price market. In the small battery segment, mass production of the 46-series will begin in the second half of this year.
It intends to fundamentally improve cost competitiveness by expanding direct procurement of raw materials, switching key materials through technology development, and strengthening direct investment in the supply chain. At the same time, the company will focus on next-generation battery development aiming for mass production of lithium-sulfur batteries by 2027, accelerate the development of dry electrodes with advantages in energy density and cost, and begin full-scale application of new stacking technology-based products starting this year.
Kim Dong-myung, President of the company, said, "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 sustainable growth foundation through qualitative immersion."
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