LG Energy Solution’s Q2 operating profit halves

[Courtesy of LG Energy Solution Ltd.]

LG Energy Solution Ltd. (LGES), the pure-play vehicle battery maker under South Korea’s LG Group, announced its provisional results for the second quarter of 2024 on Monday, reporting sales of 6.16 trillion won ($4.46 billion) and an operating profit of 195.3 billion won.

Compared to the same period in 2023, sales decreased by 29.8 percent and operating profit dropped by 57.6 percent, which is an increase of 0.5 percent and 24.2 percent respectively from the previous quarter, and were largely in line with market expectations.

The main reasons for the sluggish sales include the continued decline in electric vehicle demand since the end of 2023 and a drop in selling prices due to the decline in prices of key raw materials such as lithium.

However, it was encouraging that sales slightly rebounded from the previous quarter, with a recovery in volume detected in the North American market and an expansion in energy storage system (ESS) sales.

The company’s operating profit continued to suffer due to low operating rates and significant burdens from investments and fixed costs, but it saw substantial improvement from the previous quarter, thanks to subsidies under the U.S. Inflation Reduction Act (IRA).

The company posted an operating loss of 252.5 billion won in the second quarter, excluding the advanced manufacturing production credit (AMPC) of 447.8 billion won under the IRA. The AMPC amount for the second quarter of 2024 was 137 percent higher than the first quarter’s 188.9 billion won.

LGES expects to see a recovery from its poor performance in the first half of the year in its second half. Its major EV clients are rushing to launch new models to actively overcome the temporary stagnation in demand, and its joint venture plant with General Motors Co. (GM) is expected to begin full-scale battery production and shipments.

The company also signed a supply contract for lithium iron phosphate (LFP) batteries for EVs with Renault Group at the beginning of July 2024 and plans to convert some EV lines for ESS use, which indicates a significant mid- to long-term expansion from the second half of the year onwards.