LG Energy Solution "Single-digit Sales Growth This Year... Temporary Crisis as a Stepping Stone for Leap" (Update)

Securing Technology Leadership and Cost Competitiveness
"Facility Investment at a Level Similar to the Previous Year"

LG Energy Solution has forecasted mid-single-digit growth in sales for this year. This is interpreted as a conservative outlook compared to the past when it sustained double-digit growth amid weakening electric vehicle demand. However, the company plans to maintain a similar scale of investment in production facilities as last year to secure market leadership.

At the earnings briefing on the 26th, LG Energy Solution stated, "We expect mid-single-digit growth in sales this year," and added, "Investment in production facilities will proceed at a scale similar to the previous year (approximately KRW 10.9 trillion)."

They continued, "We will focus on preparing to expand production bases in North America, including the GM joint venture 2 (JV2) plant, and joint plants with Stellantis, Honda, and Hyundai Motor, which will become new growth engines when demand recovers, while executing investment costs efficiently and flexibly according to market conditions."

The company expects the benefit from the U.S. Inflation Reduction Act (IRA) tax credits this year to be more than double that of the previous year, reaching around 45 to 50 GWh.

LG Energy Solution also announced three key focus areas for this year: ▲building technological leadership ▲securing cost competitiveness ▲preparing for future businesses.

They plan to enhance capabilities in premium products such as high-nickel (High-Ni) NCMA products and accelerate the development of high-voltage mid-nickel (Mid-Ni) NCM and LFP battery technologies to target the mid-to-low price market. In the small battery segment, they aim to secure market dominance through full-scale mass production of the cylindrical 46 series in the second half of this year.

Additionally, they plan to secure structural cost competitiveness that remains resilient against external risks.

LG Energy Solution explained, "We will fundamentally improve cost competitiveness through expanding direct procurement of raw materials, converting key materials via technological development, and strengthening direct investment in the supply chain. Based on smart factories, we will enhance productivity and quality to reduce fixed costs and rationalize operating expenses such as logistics and utilities."

Regarding future industry preparation, the company plans to focus on next-generation battery development, targeting mass production of lithium-sulfur batteries by 2027. They will accelerate the development of dry electrode technology, which has advantages in energy density and cost, and will begin full-scale application of new stacking technology-based products starting this year.

LG Energy Solution forecasts that the electric vehicle market will grow by about the mid-20% range this year. They expect the overall market growth rate, which had been over 30% annually, to temporarily slow down as the North American region, which led global electric vehicle market growth last year with about 57% growth, slows to the low-to-mid 30% range this year.

Nevertheless, LG Energy Solution emphasized that "there are still opportunities to sustain growth momentum." They expect that aggressive price reductions and the launch of affordable models by automakers due to weak electric vehicle demand will have a positive effect on consumer purchasing sentiment. The prolonged decline in metal prices is also expected to ease OEMs' battery price burdens, leading to future demand for replenishing battery inventories.

They also anticipate maximizing the first-mover advantage by operating and constructing eight production plants in the North American market and foresee this as an opportunity to differentiate technological leadership.

"Electric Vehicle Market to Grow by About Mid-20% Range This Year"

LG Energy Solution achieved KRW 33.7455 trillion in sales and KRW 2.1632 trillion in operating profit last year, representing increases of 31.8% and 78.2%, respectively, compared to the previous year.

Lee Chang-sil, CFO (Chief Financial Officer) and Vice President, stated, "Sales continued strong growth for two consecutive years, exceeding 30%, by actively responding to demand in the North American region, and operating profit rose 78% year-on-year due to cost improvements such as logistics cost reduction, yield and productivity enhancements, and benefits from IRA tax credits."

Sales in the fourth quarter of last year were KRW 8.0014 trillion, and operating profit was KRW 338.2 billion. Sales decreased by 2.7% and operating profit by 53.7% compared to the previous quarter.

The IRA tax credit amount reflected in the fourth-quarter operating profit was KRW 250.1 billion, increasing 16% from the previous quarter due to stable mass production at local production facilities. Excluding this, the fourth-quarter operating profit was KRW 88.1 billion.

Kim Dong-myung, President of LG Energy Solution, said, "This year will be the starting point for the 'LG Energy Solution 2.0 era,' based on strengthening fundamental competitiveness such as technological leadership and realizing differentiated customer value. We will establish a solid business structure and foundation for sustainable growth through qualitative immersion."

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