LG Energy Solution sees record profit in Q4

One of the leading global battery manufacturers, LG Energy Solution, announced an increase of 43% in revenue and nearly 60% in operating profit as it seeks to expand in North America.

January 27, 2023 Anne Fischer

LG Energy Solution's TR1300 energy storage operation at Moss Landing.

Image: LG Energy Solution, Vistra Corp.

LG Energy Solution announced its whole year earnings of $223.7 million (KRW 25.6 trillion) in consolidated revenue and $9.7 million (KRW 1.2 trillion) in operating profit, marking a year-on-year increase of 44% and 58% respectively.

In the conference call, the company revealed it’s increasing its 2023 revenue target by 25% to 30% from the previous year, through the expansion and stable operation of global manufacturing facilities, as well as increasing sales in the North American region.

The company is attributing the record high revenue to its ability to meet increased demand for EV batteries and power grid energy storage systems (ESS), in addition to raising prices.

“Thanks to economies of scale led by sales growth, cost saving achieved through improving productivity, and expanding price-competitive metal sourcing, annual operating profit has also shown a significant growth compared to the previous year,” said Chang Sil Lee, CFO of LG Energy Solution on the conference call.

LGES also reported Q4 consolidated revenue increased by 12% from the previous quarter, marking a record high. Year on year it was up 92%, which the company attributes to increased EV battery sales growth in utility-scale ESS.

“Despite positive effects of economies of scale led by shipment growth and continuous improvement in productivity, the fourth quarter operating profit has seen a temporary drop on quarter due to one-off factors such as the recognition of employees’ incentives in line with the sound annual financial results and incremental expenses for ESS battery replacement,” explained LGES. “Excluding the one-off impacts, the operating profit remained similar to the previous quarter.”

In 2020, LG Energy Solution was formed after being spun off from LG Chem, and it debuted on the Korea Exchange in January 2022. In 2017 LG Chem was the first international player to enter the US residential battery market, and now, as LGES, it is firmly established in the burgeoning US battery market for electric vehicles.

LGES also announced that it will pursue 25% to 30% increase in the annual consolidated revenue in 2023, and plans to double its capex over the previous year.

“We aim to meet our annual target revenue mainly through the expansion and stable operation of global manufacturing facilities, as well as sales expansion in the North American region,” explained LGES. “We will also continue to enhance the operating profit by improving the cost curve and advancing differentiations in product competitiveness.”

Earlier this month, LGES signed a Memorandum of Understanding (MOU) with three Hanwha Group companies to collaborate on battery manufacturing equipment and battery technologies. The MoU positions LGES firmly in the US market by reinforcing its business portfolio in three sectors: advanced automotive batteries, mobility and IT batteries, and ESS batteries.

In August of 2022, LGES and Honda announced plans to invest $4.4 billion and establish a new joint venture manufacturing plant in the United States that is expected to have an annual production capacity of approximately 40 GWh. The pouch-type batteries produced at the new plant will be supplied exclusively to Honda facilities in North America.

Previously, LGES and GM announced a joint venture, Ultium Cells LLC, after securing a $2.5 billion loan from the US Energy Department to help finance construction of new lithium-ion battery cell manufacturing facilities in Ohio, Tennessee, and Michigan.

LGES announced in its conference call that it plants to further expand its global production capacity to 300 GWh by the end of this year. Its production capacity in North America is expected to reach 55 GWh, in Poland and Asia, 90 GWh and in South Korea and China, 155 GWh.

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