LG Energy Solution Reports Q1 Operating Profit of 633.2 Billion Won... Expected to Be the First Year Benefiting from IRA

LG Energy Solution recorded an operating profit of 633.2 billion KRW in the first quarter of this year, showing a 144.6% increase compared to the previous year. Since its listing, it has shown sales growth for five consecutive quarters.

On the 10th, LG Energy Solution headquarters on Yeouidaero, Yeongdeungpo-gu, Seoul. Photo by Jinhyung Kang aymsdream@

On the 26th, LG Energy Solution held an earnings briefing and announced that it achieved sales of 8.7471 trillion KRW and an operating profit of 633.2 billion KRW in the first quarter of 2023. Sales increased by 101.4% and operating profit rose by 144.6% compared to the same period last year.

This year's first-quarter sales represent the highest quarterly performance to date. Since its listing on the Korea Exchange in January last year, LG Energy Solution has maintained sales growth for five consecutive quarters. Operating profit also surged significantly, increasing by 144.6% year-on-year and 166.7% quarter-on-quarter. The operating profit margin stands at 7.2%.

Lee Chang-sil, Vice President and CFO (Chief Financial Officer) of LG Energy Solution, attributed the strong first-quarter performance to "results based on differentiated competitiveness built through continuous quality and productivity improvements and supply chain strengthening activities." He added, "Steady demand for electric vehicles in North America and increased shipments of EV batteries through the stable operation of GM Plant 1 contributed to five consecutive quarters of sales growth and solid operating profit."

Meanwhile, LG Energy Solution decided to include the expected amount of the U.S. Inflation Reduction Act (IRA) tax credit in its earnings from this quarter, reflecting 100.3 billion KRW in operating profit. Excluding the IRA tax credit effect, the first-quarter operating profit was 532.9 billion KRW.

Contributing to Customer Competitiveness through Proactive Preparation in the U.S. Market

LG Energy Solution stated that it has significantly contributed to enhancing customer competitiveness through proactive investments, securing production capacity, and advanced supply chain establishment in the U.S. market.

Due to these efforts, LG Energy Solution expects that electric vehicles equipped with batteries produced and sold in the U.S. this year will be eligible for the full IRA EV subsidies.

According to the IRA, if the conditions of ▲at least 50% of battery components being produced and assembled in North America and ▲at least 40% of critical minerals being extracted or processed in North America or countries with Free Trade Agreements (including Japan) are met, a total subsidy of 7,500 USD will be provided, consisting of 3,750 USD each for the two conditions, upon purchasing an electric vehicle.

LG Energy Solution stated, "We will continue to focus on local production of battery components and critical minerals, as well as stabilizing supply chains outside of concern countries, to actively respond to the demands of customers and consumers expecting benefits such as IRA subsidies."

In practice, LG Energy Solution plans to continuously strengthen local production capacity in North America for battery components such as cells, modules, and electrodes, and promote localization of separators and electrolytes through ongoing cooperation with partners. For critical minerals, the company intends to expand the supply ratio from regions outside concern countries through equity investments and long-term supply contracts.

Differentiated Competitiveness through Product Portfolio and Smart Factory Leading the North American Market

LG Energy Solution identified its key business strategies in the North American market as ▲strengthening responsiveness to local cylindrical battery demand ▲expanding new growth engines ▲early stabilization of production.

First, by securing cylindrical battery production bases in the U.S. and mass-producing LFP-based ESS products, the company aims to enhance customer negotiation power and market competitiveness. A representative example is the plan to build a new cylindrical and ESS LFP factory in Arizona, the largest scale (43GWh) among battery-only production plants in North America. Additionally, LG Energy Solution plans to actively improve productivity through early yield stabilization and the introduction of smart factories.

On this day, LG Energy Solution expressed expectations that the expansion of subsidies for electric vehicles and eco-friendly energy will accelerate growth in the North American EV and ESS markets, and that major customers' battery supply demands will steadily increase.

Kwon Young-soo, Vice Chairman and CEO of LG Energy Solution, said, "LG Energy Solution is establishing itself as a leading battery company in North America through proactive investments and production capacity expansion. We will continue to spare no effort to become the most profitable company trusted and loved by customers by providing world-class QCD (Quality, Cost, Delivery)."

Meanwhile, LG Energy Solution, currently producing battery cells at the Michigan standalone plant and GM Plant 1, expects to receive IRA tax credit benefits of around 15 to 20 GWh throughout this year.

LG Energy Solution plans to expand its production capacity in the U.S. to a total of 250 GWh, including GM Plants 1, 2, and 3 (140 GWh), Honda JV (40 GWh), Michigan standalone plant (26 GWh), and Arizona standalone plant (43 GWh).

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