EcoPro's profits plummet despite battery makers' gains

Korean EV battery companies are experiencing conflicting earnings reports due to plummeting battery material prices. EcoPro saw a 70% drop in operating profit, while LG Energy Solution reported an all-time high quarterly profit.

EcoPro shares once traded at 1.12 million won per share on July 18 with the growing expectations of the EV industry. [YONHAP]

Korean EV battery companies are showing conflicting earnings reports mainly due to the plunging prices of battery materials globally.

EcoPro closed at 835,000 won ($61,700) Monday, a 34 percent fall from its peak, following the news that the battery materials maker suffered a 70 percent drop in third-quarter operating profit with 65.7 billion won ($48.5 million), according to its preliminary earnings guidance.

Its two subsidiaries, EcoPro BM and EcoPro HN, also reported consensus-missing profits in the July to September period.

It is in stark contrast to battery maker LG Energy Solution which reported an all-time high quarterly profit of 731.2 billion won during the same period.

The contrasting results are outcomes largely impacted by the prices of raw materials, which affect materials companies like EcoPro.

The average price of lithium hydroxide, the main ingredient of cathodes, nearly halved to $32,000 per ton in the third quarter compared to last year. Cathodes are one of the four critical minerals in making EV batteries that take up 40 percent of the battery cost.

The price of nickel stood at $18,396 per ton as of Oct. 12 compared to the end of 2022 when it traded at $28,853 per ton.

The price drop was affected by the relatively sluggish demand for EVs in European and Chinese markets.

Battery cell companies are less influenced by the prices as they set the contract prices every six months.

LG Energy Solution currently has all of the world's five largest automakers as clients: Toyota Motor, Volkswagen, Hyundai Motor and Kia, Renault Nissan Alliance and General Motors.

Samsung SDI is estimated to log 515.7 billion won in operating profit in the third quarter, according to market tracker FnGuide, with strong sales of batteries to high-end brand clients like BMW.

SK On is predicted to post 157.6 billion won in operating loss due to the weak sales of EVs from its main clients Volkswagen and Ford, but will finally turn to profit in the fourth quarter, FnGuide said.

Europe's growing tension with China is also a favorable factor for Korean companies, experts say.

“Though Europe's restrictions against Chinese companies are not in full swing, [European companies] don't have any choice but to protect their own firms,” said researcher Kang Dong-jin from Hyundai Motor Securities. “Cooperation with Korean companies will be the best alternative for Europe.”

Chinese battery makers are growing at rapid speed, with the No. 1 CATL reporting 189.2 billion yuan ($26.3 billion) in sales in the first half, equivalent to the combined sales of three Korean battery makers.

CATL held 29 percent of the world's battery market in terms of sales, while LG Energy Solution held 16 percent, SK On 8 percent and Samsung SDI 7 percent, according to SNE Research.

BY SARAH CHEA [chea.sarah@joongang.co.kr]