LG Energy Solution Achieves Q2 Operating Profit of KRW 492.2 Billion, Returns to Profitability

Operating Profit Up 152% Year-on-Year
Returns to Profit After Six Quarters
Kim Dongmyeong: "Achieving Differentiated Competitiveness"

On July 25, LG Energy Solution held an earnings presentation and announced that it had achieved consolidated sales of KRW 5.5654 trillion and operating profit of KRW 492.2 billion in the second quarter of this year. Even after excluding tax credits reflected in the operating profit, the company remained profitable, successfully returning to the black after six quarters.

LG Energy Solution Poland Wroclaw Plant. LG Energy Solution

Sales decreased by 9.7% compared to the same period last year (KRW 6.1619 trillion), but operating profit increased by 152.0% compared to the same period last year (KRW 195.3 billion).

The amount of Inflation Reduction Act (IRA) tax credits reflected in the second quarter operating profit was KRW 490.8 billion. Excluding this, the second quarter operating profit was KRW 1.4 billion, marking a return to profitability after six quarters.

Lee Changshil, Executive Vice President and Chief Financial Officer (CFO) of LG Energy Solution, explained, "Sales decreased compared to the previous quarter due to weakened customer purchasing sentiment caused by increased policy volatility and the impact of lower metal prices on product prices, even though shipments in North America increased thanks to stable sales of electric vehicle (EV) products and the start of mass production at the new energy storage system (ESS) plant in Holland, Michigan." He added, "In terms of profit and loss, we achieved a return to profitability even excluding IRA tax credits, driven by an increase in high-margin products and project volumes due to a higher share of North American production, as well as company-wide cost innovation efforts such as cost efficiency and material cost reduction."

Policy Changes Such as Strengthened North American Tariffs and OBBBA Implementation... Importance of 'Local Production Capability' Increasing

During the earnings presentation, LG Energy Solution shared its 'Business Environment and Response Strategy for the Second Half of the Year.' The most critical environmental changes identified were the strengthening of North American tariffs and the enactment of the large-scale tax cut bill (OBBBA). The Trump administration is imposing a universal 10% tariff on all countries and reciprocal tariffs by country. In particular, it is applying high tariffs to Chinese-made batteries (73% for EV use and 41% for ESS use), thereby intensifying its stance against China.

The Advanced Manufacturing Production Credit (AMPC), which had been feared to sunset early, is maintained until 2032. The Investment Tax Credit (ITC) clause for ESS installation projects is also maintained, allowing tax credits for projects that begin construction by 2035. In addition, a Prohibited Foreign Entity (PFE) clause has been newly established. PFE companies are not eligible for tax credits when investing in battery facilities in the United States, and other producers must also reduce the proportion of raw materials sourced from PFEs. As a result, companies from China and other PFEs face significant restrictions in entering the US market.

Meanwhile, the European Union (EU) announced an investment of 850 million euros in battery production projects within the region, and the United Kingdom has also resumed subsidies for electric vehicle purchases and is promoting domestic demand for locally produced electric vehicles.

Significant Achievements: Chery Automobile 46 Series Order and LFP Production for ESS at Michigan Holland Plant

Last month, LG Energy Solution achieved significant order results, including signing a supply contract for the 46 series with China's Chery Automobile. This is the first cylindrical battery order contract with a Chinese finished vehicle manufacturer (OEM), which has a strong preference for domestic batteries. It is significant not only because it recognized the high technology of the new 46 series form factor, but also because it further diversified the customer portfolio.

Another major achievement was the start of mass production of lithium iron phosphate (LFP)-based ESS long cells at the Holland plant in Michigan, USA. In addition, the company continued efforts to establish a resource circulation system, such as announcing the establishment of a battery recycling joint venture with Toyota Tsusho in the North Carolina region of the United States.

Quarterly Performance Graph of LG Energy Solution. LG Energy Solution

Announcement of 'Action Tasks' for the Second Half to Sustain Performance Improvement

On this day, LG Energy Solution announced operational, business, and technological action tasks to sustain performance improvement in the second half, despite a challenging business environment.

On the operational side, the company plans to maximize utilization rates by expanding mass production of ESS, new form factors, and new mid- to low-priced chemistries in response to slowing EV demand. The company also aims to reduce fixed costs through minimal new investment and internal resource reallocation, and to secure cost competitiveness by sourcing low-cost materials and optimizing supply chains for each material.

The business portfolio will also be further strengthened. To meet the growing demand for locally produced ESS in the North American market, the company plans to establish more than 17 GWh of local production capacity by the end of this year and over 30 GWh by the end of 2026. In the European market, the company will begin mass production of competitive products such as high-voltage mid-nickel (Mid-Ni) and LFP at its Poland plant in the second half, targeting mid- to low-priced EV demand.

Innovation in technology development will also continue. For EV-use LFP, the company plans to secure cost competitiveness by applying new processes and dry electrode manufacturing. For ESS-use LFP, the company will focus on high-density and high-integration design. The new lithium manganese rich (LMR) chemistry is expected to improve energy density by more than 30% compared to LFP and will be installed in next-generation EVs of key customers by 2028. In addition, the company plans to introduce technology enabling charging within 10 minutes by 2028 and to secure mass production capability for dry electrodes at the Ochang Energy Plant in Cheongju, Chungbuk within this year.

Kim Dongmyeong, Chief Executive Officer (CEO) of LG Energy Solution, stated, "Despite the challenging business environment, we were able to achieve meaningful performance improvement based on our accumulated capabilities and solid fundamentals," and added, "If we realize LG Energy Solution's differentiated competitiveness through continuous challenge and innovation, we will be able to create unprecedented growth opportunities."

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