LG Energy Solution reports record $541.7 million profit

LG Energy Solution, Korea's top battery maker, reported a record operating profit of $541.7 million due to strong demand in the United States and tax credits.

LG Energy Solution's Ochang plant, located in Cheongju, North Chungcheong [LG ENERGY SOLUTION]

LG Energy Solution, Korea’s top battery maker, reported the highest operating profit in its corporate history, posting 731.2 billion won ($541.7 million) from strong demand in the United States and tax credits from the Inflation Reduction Act (IRA).

Operating profit jumped 40.1 percent to 731.2 billion won in the third quarter compared to the same period the year before, beating the market expectation of 675.1 billion won compiled by the market tracker FnGuide.

Sales increased 7.5 percent to 8.22 trillion won, slightly under the analysts’ expectation of 8.3 trillion won.

Net profit from the July-September period soared 124 percent to 420.5 billion won.

“Strong battery sales in the U.S. propped up the quarterly bottom line amid accelerating electrification. An expanded capacity in the company's U.S. plant and improved productivity also helped,” the statement said.

The battery maker also got a boost from U.S. government tax credits under the IRA which came into effect on Jan. 1 this year.

The IRA gives up to $7,500 in tax credits to electric vehicle (EV) buyers whose vehicles were assembled in North America, and made with minerals mined and processed in the U.S. or countries and regions that have free trade agreements with Washington.

“Tax credits worth 215.5 billion won were reflected in the quarterly operating profit,” the statement said.

Looking ahead, the company said sluggish demand for EVs in Europe and China and declining prices of lithium and nickel, key materials used in manufacturing EVs, will serve as major concerns for car battery makers in the fourth quarter.

In the fourth quarter, the company aims to win further EV battery supply deals from global carmakers.

Early this month, the company signed a deal with Toyota Motor to supply EV batteries for 10 years through 2035.

With the latest supply deal, LG Energy Solution has become a battery supplier for the world's top five carmakers — General Motors Co., Toyota Motor, Hyundai Motor Group, Volkswagen Group and the Renault-Nissan alliance.

In the U.S., LG Energy Solution currently operates two plants in Michigan and Ohio, with six factories set to begin operations, in the world's most important automobile market.

In addition to the U.S. plants, the company operates one plant each in Korea and Poland and is preparing to begin operations at its Indonesian plant.

BY LEE JAE-LIM, YONHAP [lee.jaelim@joongang.co.kr]