LG Energy Solution slashes operations at Poland plant as demand slumps

The battery maker posted an expectation-missing quarterly operating earnings of 338.2 billion won ($252.7 million) for the October-December period, up 42.5 percent on year but below the market estimation of 587.7 billion won compiled by FnGuide.

LG Energy Solution's battery manufacturing plant in Poland [LG ENERGY SOLUTION]

LG Energy Solution has been cutting down the factory utilization rate at its Poland plant since the fourth quarter last year amid the ongoing slowdown in EV demand, a company executive said Friday.

The battery maker posted an expectation-missing quarterly operating earnings of 338.2 billion won ($252.7 million) for the October-December period, up 42.5 percent on year but below the market estimation of 587.7 billion won compiled by FnGuide.

Compared to the previous quarter, the operating figure plunged 53.7 percent. Quarterly sales dropped 6.3 percent on year to 8 trillion won.

“Since mid-2023, customers in Europe have started to adjust their production volumes, thus we also have been adjusting the capacity utilization rate at our operation site in Poland,” Kim Kyung-hoon, head of the vehicle battery strategy at LG Energy Solution, said during a conference call on Friday.

“This reduced our inventory levels and had an impact on our business performance,” Kim said.

The scale of the utilization rate adjustment at LG Energy Solution’s Poland operation was not disclosed. As of the third quarter last year, the battery maker’s total capacity utilization rate on average at its production sites including the Polish plant stood at 72.9 percent, according to its regulatory filing.

“The current uncertainties in the market situation and additional incentive cuts will likely further slow down the EV demand recovery in Europe,” Kim said, adding that “we will minimize the impact of the reduced volume in demand by improving operational efficiency in production line operation, resource deployment and spending.”

LG Energy Solution’s annual operating profit increased 78.2 percent to 2.16 trillion won, while its sales rose 31.8 percent to 33.75 trillion won. Net profit surged 110.1 percent to 1.64 trillion won.

LG Energy Solution is expecting a mid-single digit growth in sales this year, as the global EV market is estimated to expand about mid-20 percent amid the sector-wide slowdown. The annual growth of the U.S. EV market, which stood at 57 percent in 2023, is expected to drop to the 30 percent level.

But the company said that it will retain its capital expenditure at the same level as last year, around 10.9 trillion won.

Its plan this year includes speeding up the development of more affordable battery cells, such as mid-nickel NCMA (nickel-cobalt-manganese-aluminum) and LFP (lithium iron phosphate) batteries, and beginning the manufacturing of its new 46-series cylindrical batteries, which are 46 millimeters in diameter.

The battery maker expects that it will receive double the amount of tax credits in 2024 compared to last year, for 45 to 50 gigawatt-hours of capacity. The tax credit provided under the U.S. Inflation Reduction Act contributed 250.1 billion won to the company’s quarterly operating profit in the fourth quarter.

The LG Energy Solution share price rose 3.53 percent on the Kospi on Friday, to close at 381,000 won.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]