LG Energy Solution Turns Profitable in Q1, Operating Profit Up 138% YoY..."Cost Reduction Efforts"

Operating Loss of KRW 83 Billion Without AMPC Tax Credit of KRW 457.7 Billion
Capacity Expansion to Be Adjusted This Year in Line with Demand
Accelerating Growth in ESS Sales as a 'Future Growth Engine'

LG Energy Solution achieved a turnaround to profitability in the first quarter of this year, driven by the tax credit benefits of the U.S. Inflation Reduction Act (IRA).

LG Energy Solution Poland Wroclaw Plant. Provided by LG Energy Solution

On April 30, LG Energy Solution announced that its consolidated operating profit for the first quarter of this year was KRW 374.7 billion, an increase of 138.2% compared to the same period last year. This marks a return to profitability compared to the previous quarter, when the company reported an operating loss of KRW 225.5 billion.

The amount of the U.S. IRA tax credit reflected in the first quarter operating profit was KRW 457.7 billion. Excluding this, the company recorded an operating loss of KRW 83 billion for the first quarter.

Sales reached KRW 6.265 trillion, a 2.2% increase from KRW 6.1287 trillion in the same period last year.

Lee Changsil, Executive Vice President and Chief Financial Officer (CFO) of LG Energy Solution, stated, "Despite positive factors such as responding to electric vehicle (EV) demand through proactive investments in North America and solid demand for cylindrical products for EVs, sales declined slightly compared to the previous quarter due to the continued conservative inventory policies of major automakers and the seasonal off-peak period for energy storage system (ESS) demand. However, profitability improved significantly quarter-over-quarter, driven by cost reduction efforts through the stabilization of raw material prices and enhanced cost efficiency. Additionally, the increase in North American sales led to higher production subsidies, resulting in an operating profit of KRW 374.7 billion and an EBITDA margin of 20%," he explained.

LG Energy Solution announced that it has achieved various milestones for sustainable growth, including production facility optimization, expansion of orders, and diversification into new businesses. Executive Vice President Lee said, "By halting the construction of the Arizona ESS plant in the U.S. and instead utilizing the Michigan standalone plant as an ESS production base, as well as acquiring the third Ultium Cells plant as a standalone facility, we not only shortened the timeline for local ESS production by one year but also maximized the utilization of investment assets through the reallocation of production facilities. Furthermore, we have demonstrated differentiated technological capabilities by successfully securing a 46-series battery supply contract with a major traditional North American automaker and large-scale ESS supply contracts with Delta Electronics in the U.S. and PGE in Poland."

LG Energy Solution projected that, considering the U.S. administration's imposition of a universal 10% tariff on all imports from mid-April, and high tariffs of 156% to 170% on certain Chinese products, 'local production capability' will emerge as an absolute competitive advantage.

Kim Dongmyung, Chief Executive Officer (CEO) of LG Energy Solution, said, "We are facing unprecedented challenges, but if we overcome this crisis wisely, it will undoubtedly become a unique opportunity for growth and advancement. Based on the strength that has enabled LG Energy Solution to achieve numerous firsts and bests in its history, we will steadfastly prepare for the future without wavering."