LG Energy Solution Drives Earnings Rebound with 'Record Quarterly' Sales of 7.6 Trillion Won (Comprehensive)

Operating Profit of 970 Billion Won by Q3... First 1 Trillion Won Operating Profit in Sight This Year

[Asia Economy Reporter Donghoon Jeong] LG Energy Solution achieved record-high sales, driven by favorable exchange rate effects and strong electric vehicle sales.

◆Quarterly Record-High Sales... Annual Sales Target Raised to 25 Trillion Won= LG Energy Solution announced on the 26th that its consolidated sales for the third quarter of this year reached 7.6482 trillion won, an increase of 89.9% compared to the same period last year, and operating profit turned positive to 521.9 billion won from an operating loss of 372.8 billion won in the same period last year. Net profit also turned positive at 187.7 billion won.

The third-quarter sales represent the highest quarterly performance ever. Operating profit was also the best, excluding the second quarter of last year (724.3 billion won), which included one-time factors such as license fee settlements and provisions.

In the second half of this year, major electric vehicle companies launched new models and expanded electric vehicle shipments, increasing battery demand. The effect of reflecting the prices of battery raw materials such as lithium, which rose 4 to 5 times in a year, as well as nickel and cobalt, in product prices also positively impacted performance. The continued favorable exchange rate environment due to the strong dollar is another factor supporting LG Energy Solution’s strong performance.

In particular, LG Energy Solution announced through a disclosure that it is raising its annual sales target to 25 trillion won this year. This follows the previous upward revision of the annual sales target from 19.2 trillion won to 22 trillion won during the second quarter earnings announcement. LG Energy Solution’s cumulative operating profit through the third quarter this year reached about 970 billion won, making it certain to surpass 1 trillion won in annual operating profit for the first time.

◆Order Backlog Increased by 110 Trillion Won in One Year to 370 Trillion Won= LG Energy Solution’s order backlog increased from 260 trillion won at the end of last year to 370 trillion won as of the end of last month, an increase of 110 trillion won. The North American share accounted for 70%.

Lee Chang-sil, Executive Vice President and CFO of LG Energy Solution, stated this during the third-quarter earnings conference call, adding, "Both sales and profits next year will be more meaningful than this year."

He continued, "In the third quarter of this year, profitability improved across all product lines due to economies of scale from sales growth, price increases reflecting rising costs of key raw materials such as metals, and productivity improvements. Additionally, the continued favorable exchange rate environment due to the strong dollar was a major factor in performance improvement."

Regarding the full review of investment in the Arizona plant in the United States, he disclosed, "We are carefully reviewing it, but no decisions have been made yet." LG Energy Solution plans to re-disclose related information either when details are finalized or within six months. Due to rising investment costs amid deteriorating business conditions, LG Energy Solution is reconsidering its investment plan to build a standalone battery plant in the U.S. with an investment of 1.7 trillion won.

Regarding concerns about reduced demand for cylindrical batteries for Tesla due to Tesla’s recent demand decline, LG Energy Solution stated, "We understand this as an impact caused by logistics disruptions due to the lockdown in Shanghai amid COVID-19. However, we are closely monitoring the situation and preparing to respond carefully, keeping in mind the possibility of some sales slowdown due to the economic downturn."

Recently, Tesla lowered the base prices of Model 3 and Model Y vehicles by 5-9% in response to weakening demand in the Chinese market. LG Energy Solution added, "However, our customers’ demand remains solid in the fourth quarter as well," and "We expect our electric vehicle sales to remain robust in the fourth quarter."

This content was produced with the assistance of AI translation services.