LG Energy Solution profit more than halves in Q2 as battery sales falter

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LG Energy Solution profit more than halves in Q2 as battery sales falter

Published: 08 Jul. 2024, 11:00 Updated: 08 Jul. 2024, 15:40

SARAH CHEA
chea.sarah@joongang.co.kr

Visitors to the InterBattery 2024 take a look at LG Energy Solution's booth in March at Coex in southern Seoul. [NEWS1]

LG Energy Solution's profit more than halved in the second quarter as sluggish EV battery sales dragged down its earnings.

The Korean battery maker limped to a weaker-than-expected profit of 195.3 billion won ($142 million) during the April-June period, down 57.6 percent on year, according to a preliminary earnings announcement Monday.

It fell considerably short of the market consensus of 267.7 billion won compiled by FnGuide.

When excluding tax credits from the U.S. government's Inflation Reduction Act (IRA), the company logged an operating loss of 252.5 billion won.

"Tax credits worth 447.8 billion won were reflected in the quarterly operating profit,” LG Energy said in a statement.

The U.S. Advanced Manufacturing Production Credit under the IRA offers generous tax credits to energy-friendly product manufacturers for making specific components within the United States.

It's the second quarter in a row that the Korean battery maker's profit figure has slid to a loss when discounting the IRA incentives.

Revenue dropped 29.8 percent to 6.2 trillion won, also falling short of market expectations at 6.7 trillion won.

The preliminary report did not provide an earnings breakdown or a net profit estimate. LG Energy is set to release finalized second-quarter earnings figures on July 25.

LG Energy CEO Kim Dong-myung recently said the company will control its investment size considering the weak demand for EVs.

The battery firm recently halted construction of its multibillion-dollar battery production line for energy storage systems in Arizona, seven months after breaking ground, in reaction to the stalling EV market.

The company is instead focusing on developing cheap lithium iron phosphate (LFP) batteries to boost its profitability to compete with rapidly-growing Chinese players, which currently claim an 80 percent market share.

LG Energy earlier in the month inked an LFP battery deal with Renault in a first for Korean battery makers.

LFP batteries are around 30 percent cheaper than nickel, manganese and cobalt batteries, a sector in which Korean companies hold a firmer standing.

LG Energy Solution's share in the world's overall battery market slipped to 25.6 percent this year through the end of May from 27.3 percent during the same period last year, according to market tracker SNE Research.

LG Energy Solution shares closed at 358,500 won on Monday, up 0.3 percent from the previous session's close.

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