LG Energy Solution to cut investment after nearly posting loss

Industry

Published: 25 Apr. 2024, 14:31 Updated: 25 Apr. 2024, 17:50

LG Energy Solution to cut investment after nearly posting loss

An employee at the LG Energy Solution's headquarters office in Yeongdeunpo District, western Seoul [NEWS1]

LG Energy Solution is downsizing its investment plan in the wake of weak earnings reports impacted by slowing EV sales growth.

The announcement was made Thursday after the battery maker reported 157.3 billion won ($114 million) in operating profit in the first quarter, a 75.2 percent plunge compared to the same period a year earlier.

The company almost slipped into the red, with an operating loss of 31.6 billion won staved off with tax credits from the U.S. government’s Inflation Reduction Act.

"We will have to cut capital expenditure considering sluggish EV market conditions and client demand," said Lee Chang-sil, chief finance officer at LG Energy Solution, during a conference call on Thursday.

It's the first time the company has made official remarks about downsizing its investment, having said earlier in the year that it would maintain its capital expenditure at the same level as last year, around 10.9 trillion won.

Revenue fell 30 percent to 6.1 trillion won in the first three months of the year, falling short of the market consensus of 6.5 trillion won compiled by FnGuide, while net profit plummeted 62.3 percent to 212.1 billion won.

LG Energy blamed "falling battery prices" and "lower demand for EVs" for the weak performance.

Its battery plant in Tennessee, jointly operated with General Motors, recently started production. The batteries will be installed in GM's next-generation EVs.

The company recently broke ground on an independent factory in Arizona, which will be its first cylindrical battery plant in North America. Lithium iron phosphate batteries for energy storage systems will also be made there.

LG Energy held 13.7 percent of the world's battery market in January and February, down 0.2 percentage points on year. Chinese rival CATL claimed 38.4 percent, up 4.8 percentage points.

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