LG Energy Solution reports 73% drop in 2nd operating profit

LG Energy Solution's headquarters in Yeouido, western Seoul. [NEWS1]

LG Energy Solution's second-quarter operating profit fell 73 percent on year as business was hindered by the global logistics crisis and lockdowns in China.

In a preliminary earnings announcement on Thursday, the company said its operating profit in the April-to-June period was probably 195.6 billion won ($150 million). The figure falls short of the market consensus of 238.4 billion won, as reported by market tracker FnGuide.

The base effect was also a factor, as the company booked a gain of about 550 billion won in the first quarter of 2021 related to compensation it received from SK Innovation after a high-profile battery trade secret dispute in the United States.

Sales are likely to come in at 5.07 trillion won, down 1.2 percent on year. The market expectation was 4.8 trillion won.

Neither net profit nor segmentation were provided.

The company blamed the global logistics crisis and lockdowns in China during the pandemic as the major reasons for the weak results.

Chun Hye-yeong, an analyst at Daol Securities, said "sales of cylindrical batteries to Tesla dropped in the second quarter" as the automaker's Shanghai plant was hit hard due to the lockdowns.

The prices of batteries rose, but the cost of raw materials increased more dramatically, Chun added.

Analysts forecast that the figures will rebound in the third quarter as the first Ultium Cells plant in Ohio is expected to start production. Ultium Cells is a 50-50 joint venture between General Motors and LG Energy Solution that makes batteries for the Detroit-based automaker's EVs.

"Tesla upgraded the capacity of its Shanghai plant from 68,000 per month to 88,000, which will increase demand for cylindrical EV batteries," Kang Dong-jin, an analyst at Hyundai Motor Securities, wrote in a recent report.

LG Energy Solution was the No. 2 EV battery maker in the world, with 14.4 percent of the global market in the January-to-May period, according to data from SNE Research, right behind China's CATL, which had 33.9 percent of the market. China's BYD has 12.1 percent.

BY SARAH CHEA [chea.sarah@joongang.co.kr]