Samsung SDI to forge ahead with investments despite underwhelming Q2

The battery maker has committed to its initial investment plan despite a 38 percent drop in operating profit in the second quarter.

Samsung SDI CEO Choi Yoon-ho speaks during the Intellectual Property Fair held at its headquarters in Giheung, Gyeonggi, in May. [SAMSUNG SDI]

Samsung SDI is pushing ahead with its initially planned investments despite posting weaker-than-expected profit in the second quarter amid stalling EV battery sales.

The commitment stands in contrast to the latest trend by local battery makers, which are downsizing their investment portfolios amid cooling EV demand globally.

Samsung SDI posted 280.2 billion won ($202 million) in operating profit in the second quarter, down 38 percent on year, considerably short of the market consensus of 332 billion won compiled by FnGuide.

Revenue fell 24 percent to 4.45 trillion won during the April-June period, also missing analyst estimates of 5.2 trillion won.

Net profit plunged almost 40 percent to 301.2 billion won.

A decline in battery sales largely ate away at sales with a 27 percent drop to 3.9 trillion won, while the sector’s operating profit plummeted 46 percent to 208 billion won.

"We failed to meet market expectations due to the persistent sluggish demand for batteries," said Kim Yoon-tae, vice president of the business management office at Samsung SDI, during a conference call Tuesday.

Samsung's latest Samsung Battery Box, a battery for energy storage systems, features a 37 percent increase in energy density over previous products. [SAMSUNG SDI]

Kim added, however, that there is "no change in SDI's investment plan" as it already made "twice as much investment in the first half compared to same period last year."

The company reportedly estimates around 6.5 trillion won in capital expenditure this year, up 65 percent from the previous year. It spent 1.6 trillion won in investment in the first quarter, according to its regulatory filing.

"Samsung SDI is pouring money into necessary sectors such as an expansion of the Hungarian plant and the long-term R&D segment like solid-state batteries," Kim added.

Its battery plant in Indiana, a joint endeavor with Stellantis, will start operations within the year, a few months ahead of the initial timeline. The Korean battery maker is also preparing an independent battery plant in the United States.

Samsung plans to combat the current market uncertainties with a focus on its energy storage system (ESS) business, having recently inked an ESS deal potentially worth 1 trillion won with Florida energy company NextEra Energy.

"We are in talks with more U.S. clients for ESS orders," said Michael Son, executive vice president of the strategic marketing division at Samsung SDI, during the conference call.

Son also said it delivered its pilot solid-state battery products to five clients to receive feedback. Samsung SDI is one of the front runners in the so-called dream batteries, which boast high energy density and safety. There is also no risk of explosion or fire, but the technology has yet to be commercialized by any battery company or auto manufacturer.

SDI's inexorable moves come as other local Korean battery makers are downsizing their investments while halting the construction of plants.

LG Energy Solution recently said it will cut its investments as it almost slipped to an operating loss for two consecutive quarters. Its operating profit more than halved at 195.3 billion won in the second quarter, down 58 percent on year. When excluding the subsidies received under the U.S. Inflation Reduction Act, however, the figure sinks to a loss of more than 253 billion won.

The battery firm recently halted construction of its multibillion-dollar battery production line for energy storage systems in Arizona, only seven months after breaking ground, in reaction to the stalling EV market.

Ultium Cells, a joint battery venture between LG Energy and General Motors, is also slowing the construction of its third plant in Michigan as the U.S. automaker cut its target for EV production.

SK On is estimated to report more than 200 billion won in operating losses in the second quarter. It will be the 11th consecutive quarter in the red as the battery-making company under SK Innovation has never turned a profit since its establishment.

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