LG Energy Solution logs 148% jump in profit in first quarter

LG Energy Solution headquarters in Yeouido, western Seoul. [YOHA[]

LG Energy Solution logged a 148 percent jump in profit in the first quarter thanks to constant solid demand for electric vehicle batteries and an estimated tax credit from the Inflation Reduction Act (IRA).

Its net was at 562 billion won ($420 million) in the first quarter, up 148 percent on year, significantly beating the market consensus of 346.1 billion won compiled by FnGuide.

Operating profit surged 144.6 percent to 633.2 billion won, also overshooting analyst expectations.

Quarterly revenues came in at an all-time quarterly high of 8.7 trillion won during the January-to-March period, a 101.4 percent year-on-year increase. It beat the consensus of 8.4 trillion won.

Lee Chang-sil, chief finance officer at LG Energy Solution, attributed "strong sales of electric vehicles in the North American region, and stable operation of Ultium Cells' first factory in Ohio," for the solid performance.

The strong performance was also helped by its reflection of an estimated tax credit of 100.3 billion won from the U.S. government. Under the IRA, it grants domestic battery manufacturers a credit of $35 per kilowatt-hour for battery cells and an additional $10 per kilowatt-hour for battery modules manufactured and sold in the United States from 2023.

"We will be selling a total of 20 gigawatt-hour of batteries in the U.S. market through our Michigan plant and Ohio joint plant with General Motors," Lee added during a conference call Wednesday morning. "Tax credit will constantly rise."

LG Energy Solution aims to expand the capacity to 250-gigawatt hours by the end of 2025. Three joint plants with General Motors in Ohio, Tennessee, and Michigan will have up to 140 gigawatt-hours of capacity, while a joint factory with Honda up to 40 gigawatt-hours in Ohio.

When asked about its plans for developing a cheaper lithium iron phosphate, or LFP, battery, it said it is considering the development.

"We got inquiries from some global automakers about LFP batteries, and we are reviewing the entry," Kim Gyung-hoon, vice president at LG Energy Solution's automotive battery planning department, said during the conference call.

"We are open to all the possibilities, including the LFP batteries and other products such as batteries with lower portion of nickel."

It is in the process of developing a lithium iron phosphate, or LFP, battery, to diversify its portfolio. LFP batteries, largely controlled by Chinese manufacturers, have less energy density but cost less and have lower fire risks.

Around 95 percent of the LFP battery market is controlled by Chinese manufacturers including CATL.

LG Energy Solution recently announced a 7.2 trillion won investment in building battery plants in Arizona including facilities for LFP batteries for energy storage systems.

LG Energy Solution closed up 2.9 percent to 567,000 won on Wednesday.

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