LG Energy Solution to cut down investment next year

Battery maker plans to control expenditures due to uncertain outlook for EV demand

LG Energy Solution Michigan (LG Energy Solution)

LG Energy Solution will tighten its belt next year to cope with uncertain market conditions due to the slowing growth of the electric vehicle sector, the Korean battery maker said Monday as it announced its third-quarter earnings.

The company posted 6.88 trillion won ($4.97 billion) in sales in the third quarter of this year, down 16.4 percent on year. Its operating profit was 448.3 billion won, down 38.7 percent on year. The company would have logged a quarterly operating loss of 17.7 billion won without the US government’s Inflation Reduction Act tax credit of 466 billion won.

“With the exception of essential investments we are going to have to minimize (capital expenditures) so we expect that the amount of (capital expenditures) for next year will be significantly cut down from this year,” said Lee Chang-sil, chief financial officer at LG Energy Solution, in a conference call following the earnings report.

“Forecasting 2025, we believe that the competition is heating up considering various factors such as the continuing macro-uncertainties and geopolitical risks, the rising export from Chinese companies and our clients’ plans to internalize (EV) batteries.”

The CFO said LG Energy Solution projects “conservative” growth in its sales for next year, highlighting that the company will focus on securing the most advanced battery technologies as well as cost competitiveness that would not be hindered by outside factors.

As for the fourth quarter earnings outlook, Lee predicted that improving profitability will be difficult due to some one-off factors such as automakers adjusting their stocks at year-end and a seasonal sales mix that sees a drop in the delivery of high-profit products.

The battery maker noted that it will begin producing samples of its 46-Series cylindrical batteries in the fourth quarter, adding that the new mass production line at the Ochang plant is in the final stages before it begins operation. The company said it is in talks with a number of clients to discuss supplying the cylindrical batteries.

LG Energy Solution reaffirmed that it is developing dry electrode technology to achieve higher energy density and lower cost, intending to apply it to mass production in 2028.

Expecting a strong demand in the energy storage system, or ESS, sector in the future, the company said it will try to maximize the benefits from policies supporting local manufacturing by starting ESS production in the US next year and possibly switching EV production lines to ESS production lines in the European market.

As the company remains committed to investing in research and development expenses to secure technological leadership in the battery sector, LG Energy Solution said it will look to diversify its business portfolio by setting up closed-loop recycling systems, bolstering battery-based software and services and exploring new opportunities such as urban air mobility and robotics.

“While we expect unprecedented shifts in external environments, we will be nimble in responding to these changes through our comprehensive business strategy," said Kim Dong-myung, CEO of LG Energy Solution.

"Capitalizing on our unmatched product portfolio, we will enhance the values we provide our customers and secure solid leadership in the global battery market."

By Kan Hyeong-woo(hwkan@heraldcorp.com)