Samsung SDI Soars with Electric Vehicle Batteries... Record High Sales and Operating Profit (Comprehensive)

Sales Surpass 5 Trillion Won, Operating Profit Exceeds 500 Billion Won
European Electricity Price Burden Offset by High-Value Products and Exchange Rate Effects
Electric Vehicle Batteries Account for Over 50% of Total Sales

[Asia Economy Reporter Choi Seoyoon] Samsung SDI achieved its highest-ever performance by surpassing 5 trillion KRW in sales and 500 billion KRW in operating profit for the first time in its history in the third quarter of this year. This was thanks to increased battery sales driven by the growth of the global electric vehicle market. With this record-breaking performance, the cumulative results for this year have already exceeded last year's annual figures.

Samsung SDI announced on the 26th that it recorded sales of 5.368 trillion KRW and operating profit of 565.9 billion KRW in the third quarter. Sales increased by 56.1% (1.9282 trillion KRW) and operating profit rose by 51.5% (192.4 billion KRW) compared to a year ago.

Among the two business divisions Samsung SDI operates (Energy Solutions and Electronic Materials), the Energy Solutions division posted a double-digit operating profit margin. The Energy Solutions division is responsible for developing and selling medium-sized batteries such as those for electric vehicles and energy storage systems (ESS), as well as small batteries for smartphones.

Electric Vehicle Battery Sales Exceed 50% of Total

Sales in the Energy Solutions division reached 4.834 trillion KRW, up 76.4% year-on-year, and operating profit increased by 140.2% to 484.8 billion KRW. The operating profit margin was 10.0%.

Samsung SDI analyzed that despite rising raw material costs due to the global economic downturn and inflation, its strategy of "qualitative growth with profitability superiority" was effective.

Compared to the previous quarter, medium and large batteries showed significant performance improvement. Sales of automotive batteries increased and profitability improved as premium electric vehicle demand remained solid and sales of high-value-added products such as the P5 (Gen.5) expanded. ESS batteries reflected raw material cost increases in prices and improved profitability by expanding sales in Europe.

Small batteries grew sales centered on high-value-added products and improved profitability. Sales of cylindrical batteries for electric vehicles and ultra-high-power power tools increased, driving performance improvement.

The Electronic Materials division, which accounted for 19% of sales last year, saw declines in sales and profits compared to the previous quarter due to weak demand in the downstream market. Sales were 534 billion KRW, down 23.6% year-on-year. Operating profit fell 52.8% to 81.1 billion KRW. Although sales of polarizing films decreased due to weakened demand in downstream industries such as TVs, relatively favorable profitability was maintained thanks to the start of supply for new OLED material platforms and increased sales of semiconductor materials.

In a conference call held after the earnings announcement, Samsung SDI stated, "Operating profit margin reached 10% as sales growth centered on high-value-added small batteries and profitability of medium and large batteries greatly improved," and "Sales of electric vehicle batteries, including prismatic and cylindrical types, accounted for more than 50% of total company sales."

Regarding the impact of rising energy prices in Europe, Samsung SDI explained, "The Russia-Ukraine war continues, and Russia has reduced or cut off natural gas supplies to Europe, causing electricity prices in Europe to rise until August, which also burdened Samsung SDI's costs. Nevertheless, strong quarterly sales growth, expansion of high-value-added product ratios, and favorable exchange rate effects offset the cost burden from rising electricity prices, resulting in significantly improved profitability."

Medium and Large Battery Sales Expected to Increase in Q4... Electronic Materials Division to Improve Compared to Q3

Samsung SDI is expected to continue its growth trend in the fourth quarter of this year. Sales of medium and large batteries are expected to increase in Q4 due to the traditional peak season effect.

Automotive battery sales will expand with year-end demand growth and the launch of new models equipped with the P5 (Gen.5) battery, while efforts to secure next-generation platforms such as the P6 (Gen.6) battery and 46Φ (diameter 46mm) will continue. ESS battery sales are expected to increase mainly for power use in the Americas.

Small battery sales are expected to expand, centered on cylindrical batteries for electric vehicles. Cylindrical batteries for power tools will minimize the impact of demand slowdown based on long-term supply contracts, and pouch-type batteries for IT are expected to enter new products of major customers.

In the fourth quarter, sales of electronic materials are expected to expand, mainly in display materials. OLED material sales will increase with the full-scale mass production of new platform products, and semiconductor materials are expected to achieve solid sales due to expansion by major customers.

Polarizing films are expected to see improved sales and profitability compared to the third quarter through customer diversification, increased demand from new TV product launches next year, development of high-value-added products, and promotion of polarizing film supply for OLED.

Recycling Business Continues to Expand... Discussing Cooperation with Automakers

Samsung SDI plans to continuously expand its recycling business to respond to strengthened environmental regulations worldwide and secure stable supplies of key raw materials. Kim Yuntae, Executive Director of Samsung SDI's Management Support Office, said in the conference call, "We are progressing with the recycling business through equity investments in recycling partners targeting nickel, lithium, and cobalt. Starting from domestic sites, we have established an industry-leading level by the end of this year at subsidiaries in Malaysia and Hungary, and plan to sequentially establish the same system in China and the United States."

He added, "In the long term, we plan to build a value chain that collects and recycles used batteries generated after electric vehicle use, and we are actively discussing this with automakers and partners."

Choi Yoon-ho, President and CEO of Samsung SDI. Photo by Samsung SDI

Choi Yunho, CEO of Samsung SDI, said, "Despite rising raw material costs and concerns about market demand slowdown, achieving record-high performance is the result of the collective efforts of all Samsung SDI employees," adding, "To become a global Top Tier company by 2030, we will accelerate the execution of our three management policies: 'unmatched technological competitiveness,' 'best quality,' and 'qualitative growth with profitability superiority,' while striving to fulfill our social responsibilities through eco-friendly management."

"IRA is an Opportunity for Growth in the U.S. Business... Tax Benefits Starting from 2023"

Meanwhile, Son Mikael, Vice President and Head of Strategy Marketing Team at Samsung SDI's Medium and Large Battery Business Division, said in the conference call that the Inflation Reduction Act (IRA) is expected to have a positive impact as it accelerates the U.S. green policy.

Samsung SDI explained, "Among the tax benefits for consumers purchasing eco-friendly vehicles, the key mineral-related conditions are expected to be met from 2023 by leveraging the fact that the U.S. has free trade agreements (FTA) with certain countries," adding, "Although the use of minerals from certain countries of concern will be completely excluded from 2025, Samsung SDI is working to meet the conditions through diversification of supply sources."

He continued, "Tax benefits related to battery components are difficult at the moment, but starting local production in 2025, it is expected that conditions can be met through cooperation with major partners."

Samsung SDI said, "Regarding tax benefits for local battery manufacturers, benefits are expected at the time of local production," but added, "Since interpretations within the law are still ambiguous, detailed content needs to be confirmed. We will thoroughly prepare and turn this into a good opportunity for growth in the Americas."

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