LG Energy Solution Ltd., the world’s third-largest battery maker, said its quarterly operating profit more than doubled from the previous three months on higher sales of products for electric vehicles and energy storage systems (ESS) despite the prolonged global weakness in the clean car sector, pushing up its share price.
LG Energy on Monday reported an operating profit of 448.3 billion won ($323.6 million) in the third quarter on a consolidated basis, 129.5% higher than 195.3 billion won in the April-June period, with sales up 11.6% to 6.9 trillion won during the period.
The South Korean battery maker said the latest quarterly profit fell 38.7% from a year earlier as revenue slid 16.4%.
Excluding tax benefits under the US Advanced Manufacturing Production Credit (AMPC) program, LG Energy would have logged an operating loss of 17.7 billion won in the third quarter, far smaller than the shortfall of 252.5 billion won.
“We significantly improved profitability compared to the previous quarter as higher shipments of EV and ESS batteries raised overall operating rates and lower metal prices reduced unit costs,” LG Energy Chief Financial Officer Lee Chang Sil said during an earnings call.
LG Energy’s share ended up 2.3% to 416,500 won in South Korea’s main stock market, far outpacing a 1.1% gain in the benchmark Kospi.
TO CUT CAPEX AMID CAUTIOUS OUTLOOK
The supplier to Tesla Inc., the world’s second-largest EV maker, plans to cut capital expenditures next year as it offered cautious views on the fourth quarter and 2025, given the protracted slowdown in the eco-friendly automobile market.
“Sales in the fourth quarter are likely to fall if the falling prices of raw materials such as lithium. It is difficult to improve profitability further in the fourth from the third on weaker sales of batteries with high profits,” an LG Energy official.
“We are cautious over the next year due to lots of uncertainties although global automakers plan to launch new EVs.”
Operating rates of its battery plants in China and the US, the world’s No. 1 and No. 3 EV markets, are unlikely to improve further in the fourth quarter as major automakers are set to cut their inventories ahead of year-end, according to the company.
LG Energy plans to “significantly” reduce investments in new manufacturing facilities next year, Lee said.
“We aim to cut investment losses by reducing new capacity expansion in North America where investments are concentrated and preventing excessive capacities,” said the CFO. “We will optimize asset management and minimize spending on facility investments except for essential ones, in addition to slowing down investments.”
EXPANDS CUSTOMER BASE, PRODUCT PORTFOLIOS
LG Energy is expanding its customer base and product portfolios to recover earnings in the protracted slowdown in the eco-friendly automobile market.
The battery unit of South Korea’s fourth-largest conglomerate LG Group earlier this month signed deals to supply batteries of more than 160 gigawatt-hours (GWh) to German luxury carmaker Mercedes-Benz AG and US automaker Ford Motor Co.
LG Energy aims to recover its EV battery business with the high-end 4680 battery, which measures 46 millimeters in diameter and 80 mm in length, mid-priced high-voltage mid-nickel products and cheap lithium iron phosphate (LFP) models.
The company is in talks with various EV makers about supplying the 4680 models as its battery plant in South Korea is set to start mass production of samples, another company official.
The 4680 battery is being heralded as a game-changer in the battery industry as it is known to increase energy density by five times and output by six times compared to the conventional 2170 type and boost electric vehicles’ mileage by 16% on average.
LG Energy is also negotiating with clients seeking large volumes of batteries for electric grids in North America, for long-term supply deals as the ESS market is expected to grow by more than 20% on average a year by 2028.
Write to Hyung-Kyu Kim at khk@hankyung.com
Jongwoo Cheon edited this article.