LG Energy Solution hit record earnings milestone in 2023

LG Energy Solution hit a new milestone in its history in 2023 by surpassing an annual sales record of 30 trillion won ($22.7 billion) and an operating profit of 2 trillion won. But a slowdown in demand during the latter half of 2023 led to the fourth-quarter performance falling below market expectations.

On Tuesday, LG Energy Solution announced its pro forma annual sales of 33.75 trillion won and an operating profit of 2.16 trillion won in 2023. Compared to the previous year, this represents a 31.8 percent increase in sales and a significant 78.2 percent surge in operating profit and marks the first time LG Energy Solution has surpassed the 2 trillion won mark in annual operating profit. The EV battery maker has maintained steady growth ever since its establishment in December 2020, achieving sales of 17.85 trillion won and an operating profit of 768.5 billion won in 2021 and 25.6 trillion won and an operating profit of 1.21 trillion won in 2022.

But LG Energy Solution’s 2023’s fourth-quarter performance fell short of market expectations due to deteriorating market conditions, with the company recording sales of 8 trillion won and an operating profit of 338.2 billion won for the period. Sales fell by 6.3 percent compared to the same period the previous year, while operating profit rose by 42.5 percent. A market consensus for the company’s fourth-quarter earnings polled by FnGuide was 8.46 trillion won in sales and 587.7 billion won in operating profit.

Excluding the Advanced Manufacturing Production Credit (AMPC) under the U.S. Inflation Reduction Act, operating profit amounted to 88.1 billion won. Excluding the AMPC, the fourth-quarter operating profit margin was 1.1 percent.

The additional operating profit from the AMPC in the fourth quarter of 2023 came to 250.1 billion won. This growth is attributed to sustained production and sales in the North American region, leading to a continuous expansion of AMPC benefits.

The decline in fourth-quarter sales compared to the previous year was attributed to softened demand for electric vehicles, prompting finished vehicle manufacturers to adopt a conservative inventory management strategy.

While LG Energy Solution’s AMPC increased compared to the previous quarter in the fourth quarter of 2023, the reason operating profit fell below the consensus is believed to be the decline in shipment volume in the European region.