LG Energy Solutions lowers revenue target for this year from '5% increase' to '20% decrease'

[KOREA FINANCIAL TIMES, Gwak Horyung] LG Energy Solutions has drastically lowered its revenue target for this year from '4-6% growth' to 'more than 20% decline'. The company sees the outlook for the second half of the year as uncertain after a dismal first half.

LG Energy Solutions reported on July 25 that its revenue for the second quarter of last year fell 29.8% year-on-year to 6.16 trillion won ($6.19 billion).

Operating profit for the same period fell 57.6% to 4606 billion won. Profitability plummeted even as the U.S. IRA tax credit nearly quadrupled from 110.9 billion won in the second quarter of last year to 447.8 billion won in the second quarter of this year. This was due to market-wide headwinds, including slowing demand for electric vehicles and weaker metal prices, which led to lower selling prices.

“This year's sales are expected to decline by more than 20 percent year-on-year,” LG Energy Solutions said today. Initially, the company expected sales to grow in the mid-single digits (4-6%) when it set its business plan for this year. However, the company was forced to lower its sales expectations as major automakers began to accelerate their electrification.

In particular, the global EV market growth rate has been lowered from the mid-20s to the low-20s. In particular, the U.S. EV market was expected to grow in the mid-30s, but now it has been lowered to the low-20s. We also lowered our European EV growth forecast from the mid-20s to the mid-10s.

We also reduced our IRA tax credit forecast from 45-50 GWh to 30-35 GWh. However, the IRA tax credit is unlikely to be completely eliminated even if Donald Trump is re-elected, the company said.

“Trump's election could pose a risk to EV demand,” said Changbeom Kang, chief strategy officer at LG Energy Solutions, ”but the IRA tax credit will remain in place as it requires administrative procedures and political consensus.”

LG Energy Solutions plans to overcome this difficult external situation through operational efficiency and technology leadership.

First, the company will review its ongoing investment plans. Only essential investments will be made in new facilities in accordance with strategic priorities, while production efficiency will be improved by converting existing EV battery production lines to ESS (energy storage systems) to improve plant utilization rates.

It is making progress in battery diversification. LG Energy Solutions, which centers on pouch-type NCM batteries, has recently signed contracts with Renault for LFP batteries and with Q CELLS to supply ESS batteries for the North American power grid.

The 4680 cylindrical battery, known as the “Tesla battery,” will also begin full-scale mass production at the Ochang plant as early as the end of the third quarter. “In addition to the customers we have already secured, we are in talks with various customers to supply the 4680 and various specifications of the 46 series,” said LG Energy Solutions.

Gwak Horyung (horr@fntimes.com)