- LGES posts the quarterly revenue of KRW 8.7 trillion and operating profit of KRW 633 billion in the first quarter of 2023
- LGES batteries, manufactured and sold this year, fulfill the IRA requirement for battery components and critical minerals, meeting customers’ needs for EV tax credit eligibility
- The company presents its business strategy for the North American market, aimed at solidifying steadfast market leadership
SEOUL, April 26, 2023 – LG Energy Solution (LGES; KRX: 373220) today announced its first quarter earnings, delivering the fifth consecutive quarterly revenue growth, as well as improved operating profits.
LGES posted consolidated revenue of KRW 8.747 trillion, a 2.5 percent increase quarter-on-quarter and 101.4 percent increase year-on-year. It is also the highest quarterly record ever.
“We actively responded to strong EV demands in North America. Our EV battery shipment has increased due to the stable operation of the GM JV (Ultium Cells) plant in Ohio, and average selling price (ASP) has also improved,” explained Chang Sil Lee, CFO of LG Energy Solution. “Thanks to our timely and strategic business decisions, we’ve marked the fifth consecutive quarter of top-line growth since the initial public offering (IPO).”
The company’s first quarter operating profit reached KRW 633 billion with a margin of 7.2 percent, marking a 166.7 percent increase quarter-on-quarter and 144.6 percent increase year-on-year. “We achieved a solid operating profit through our continuous efforts for cost innovation, by enhancing efficiency of material cost and other expenses, and improving yields. The economies of scale effect from shipment growth has also played a role,” Lee said.
Given the Advanced Manufacturing Production Credit (Section 45X)[1] under the IRA took effect on January 1, 2023, LGES decided to reflect the estimated tax credit amount in its operating profit starting from the first quarter. Accordingly, the Q1 operating profit (KRW 633 billion) included the estimated tax credit amount of KRW 100.3 billion. Excluding the estimated tax credit, the operating profit would be KRW 533 billion, recording a 105.8 percent increase year-on-year.
■ Solid Market Leadership in North America
Since building its first U.S. EV battery plant in 2012, LGES has preemptively established manufacturing capacity and supply chain in North America, meeting the needs of its OEM customers seeking the EV tax credit eligibility under the Inflation Reduction Act.
The company’s batteries, manufactured and sold this year, fulfill the IRA requirement for both battery components (50 percent) and critical minerals (40 percent). Therefore, EVs equipped with LGES batteries are expected to be eligible for the full USD 7,500 EV tax credits this year.
In order to solidify its market leadership in North America, LGES aims to expedite localizing manufacturing and assembly of battery components, including electrodes, cells, and modules, and cooperate with existing partners for localization of separator and electrolyte production.
Regarding critical minerals, the company will continue to expand direct sourcing from non- FEOCs (Foreign Entities of Concern) and secure upstream materials through equity investment and long-term supply agreements.
■ Future Business Strategies for North America
As the EV and ESS market growth in North America will further accelerate and major customers’ needs for local battery manufacturing will continue to increase, LGES will respond to the market demand by 1) strengthening its capabilities to respond to the rising demands for cylindrical batteries in the U.S., mainly by enhancing customer accessibility and negotiating power on the back of its U.S. production base; 2) boosting competitiveness in the local battery market by securing new growth engines, such as lithium iron phosphate (LFP) batteries for energy storage systems (ESS); and 3) continuing on with efforts to improve productivity by pulling in yield stabilization in new plants and applying smart factory technology.
“With a vision that batteries will change the world, we pioneered the industry for 30 years and built America’s first EV battery plant,” said Youngsoo Kwon, CEO of LG Energy Solution. “Now with the U.S and the world embracing EVs as the key way to the future, we have a lot of momentum to bring about real-life, large-scale transitions toward electrification. At the same time, we will maximize our core strengths of product competitiveness and operational expertise, providing the world-best quality products at all times.”
The company currently has the largest number of battery manufacturing facilities being constructed or operating in the U.S. This year, it expects 15~20GWh would be eligible for the Advanced Manufacturing Production Credit, a tax credit granted directly to battery manufacturers. Eventually, it plans to secure a total of 250GWh of annual production capacity in the U.S. from two stand-alone and four joint venture plants.
[1] The Advanced Manufacturing Production Credit under the IRA grants domestic battery manufacturers a tax credit of $35/kWh for battery cell and additional $10/kWh for battery module manufactured and sold in the US from 2023.