Seoul, April 25, 2024 – LG Energy Solution (KRX:373220) today announced its first-quarter earnings results, as well as key results in expanding its U.S. production operations and new businesses.
The company's consolidated revenue for the first quarter was 6.1287 trillion won, down 23.4% from the previous quarter. This is also a decrease of about 30% compared to the same period last year. The company's operating profit for the first quarter was KRW 157.3 billion, down 53.5% sequentially and 75.2% year-on-year, with a profit margin of 2.6%.
Lee Chang-sil, Chief Financial Officer of LG Energy Solution, said, "Thanks to our proactive response to the needs of strategic customers, we achieved double-digit revenue growth in cylindrical EV batteries. However, total revenue declined due to weaker upstream market demand and the long-term impact of metal prices on average selling prices (ASPs). ”
"The impact on operating profit was mainly due to the burden of fixed costs due to lower revenues due to slowing demand for electric vehicles and utilization adjustments, as well as higher metal expenditure costs due to lagging raw material inventory consumption," Lee said. Among them, the IRA tax credit was also reduced by 188.9 billion won due to reduced demand and disruption of equipment renovation work at the Michigan plant.
Actively responded to market uncertainties and achieved remarkable results in steady operation
Despite the slowdown in global EV demand and the ensuing uncertainty in the market, LG Energy Solution continues to invest and prepare for the future and has made significant achievements in stable global operations and key business areas.
In the first quarter, the company's General Motors Joint Venture (JV) plant in Tennessee began production and successfully delivered its first shipments to customers in early April. The joint venture plant is expected to gradually increase its annual production capacity to 50 GWh to supply innovative batteries for GM's upcoming models based on the BEV3 (BEV3: third-generation battery electric vehicle) platform.
LG Energy Solution also achieved another important milestone in the operation of its Arizona production base. The site is the first stand-alone cylindrical and ESS cell plant in North America and will ensure an average annual production capacity of 53GWh. The integrated Arizona manufacturing facility will produce Series 46 cylindrical batteries and LFP ESS batteries, with the aim of strengthening its technology leadership in North America and responding to the needs of local customers.
In addition, in order to create a virtuous growth cycle, LG Energy Solution has been working on the development of new business areas, namely battery software and related services. To this end, LG Energy Solution has established a strategic partnership with Qualcomm Technologies. In terms of battery-related services, LG Energy Solution has officially launched battery swapping stations, and has installed 20 swapping stations in Seoul so far. Through these new businesses, the company is not only a leader in battery manufacturing and sales, but also committed to pursuing breakthroughs and innovations in battery-related software and services.
Finally, LG Energy Solution expanded its global supply chain and secured investment resources in the first quarter, enhancing its resilience to market uncertainty. In order to establish a sound supply chain, the company has signed a lithium cathode material supply agreement (160,000 tons for 5 years) with Changzhou Lithium Source and an IRA-compliant lithium concentrate supply agreement (85,000 tons per year) with WesCEF.
To secure investment resources and alleviate short-term financial burdens, LG Energy Solution issued the largest KRW-denominated corporate bond in history and signed a long-term lease agreement for its cylindrical EV battery plant in Arizona.
We will further enhance our basic advantages and focus on investment efficiency and cost competitiveness
LG Energy Solution also announced a full-year action plan aimed at enhancing the company's fundamental competitiveness. First of all, LG Energy Solution will actively improve investment and cost efficiency in response to the dynamic demand for electric vehicles. It will adjust the size of capital expenditures and the pace of execution based on priorities, and optimize capacity efficiency by maximizing the production capacity of each plant. At the same time, the operating cost structure will be improved by optimizing logistics and utility costs.
In addition to improving efficiency, the company also plans to strengthen innovation in raw material costs. The company will reduce material costs by expanding direct procurement from critical minerals to precursors and secure cost advantages by investing in the value chain. At the same time, in order to continue its growth momentum, LG Energy Solution will further enrich its global production footprint based on solid cooperation with joint venture partners. In the second quarter of this year, the company's joint venture with Hyundai Motor Group in Indonesia (10GWh) has started mass production, and the joint venture with Stellantis in Canada (45GWh) will also start operations in the second half of this year.
Finally, the company is leveraging its outstanding technological leadership to expand its product lineup. Its Ohchang plant in South Korea will begin mass production of Series 46 cylindrical cells in the third quarter. Following the start of production of ESS LFP batteries in Nanjing, China last year, the company will increase its supply to the North American and European markets to meet the demand for grid projects.
LG Energy Solution CEO Kim Dong-myung said, "Despite the challenging market outlook this year, we will further strengthen our unmatched technological leadership in the global field by strengthening our fundamental competitiveness and providing differentiated value to our customers. ”
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About LG Energy Solution
LG Energy Solution (KRX:373220) is a leading global lithium-ion battery manufacturer that operates independently from LG Chem. Its products are widely used in electric vehicles, mobile devices, IT and energy storage systems. LG Energy Solution has been deeply engaged in battery technology innovation and R&D for 30 years, and is the world's top battery-related patent holder, with more than 58,000 patents. Its strong global network spans North America, Europe and Asia, including battery production sites in joint ventures with major automakers. As a company at the forefront of green operations and sustainable development, LG Energy Solution aims to achieve carbon neutrality by 2050 and promote a diverse and inclusive corporate culture while embodying the value of shared growth.
For more information about LG Energy Solution, please visit https://news.lgensol.com