South Korean battery manufacturer LG Energy Solution (LGES) announced a projected first-quarter operating loss of 208 billion won (about $192 million CDN) due to reduced demand from electric vehicle (EV) manufacturers impacting its earnings. This figure exceeded the LSEG SmartEstimate forecast of a 160 billion won loss, which favored analysts known for consistent accuracy.
Key points include:
– LGES, a supplier for Tesla, General Motors, and Hyundai Motor, has been facing decreased demand for EV batteries with GM temporarily halting operations at a Detroit EV plant until April.
– The company anticipates a 2.5% decline in revenue to 6.6 trillion won compared to the previous year.
– LGES mentioned that the quarterly earnings guidance incorporates tax credits from the U.S. Inflation Reduction Act for its U.S.-based battery production. Excluding these credits, LGES would have reported an operating loss of 398 billion won.
– To counterbalance the EV battery decline, LGES is concentrating on expanding energy storage system (ESS) demand, driven by increasing electricity requirements for AI data centers.
– LGES aims to triple its ESS revenue this year compared to the previous year, with Nomura estimating ESS revenue to reach around 2.8 trillion won by 2025.
– Analysts suggest that the introduction of the CHARGE Act in the U.S. could present opportunities for South Korean battery manufacturers. The bill aims to restrict imports of certain Chinese-made energy storage systems due to concerns over potential remote monitoring capabilities.
LG Energy Solution, the parent company of NextStar Energy in Windsor, Ont., initially developed a battery cell factory for electric vehicle batteries but has shifted focus to energy storage systems due to the decline in the EV market. The facility is adaptable to produce batteries for both sectors in the future. Canadian authorities have pledged up to $16 billion in subsidies to NextStar, previously a collaboration between automaker Stellantis and LG Energy Solution.
LGES is scheduled to release comprehensive earnings details on April 30.