LG Energy Solution flags 77% fall in Q2 operating profit on continued weak EV demand

SEOUL, July 7 : South Korean battery maker LG Energy Solution said on Tuesday it expects April-June operating profit to fall 77 per cent to 113 billion won ($73.91 million), as sluggish electric vehicle (EV) demand continued to weigh on battery sales.

That compared with an LSEG SmartEstimate forecast of a 249 billion won profit, which is weighted toward analysts who are more consistently accurate.

Here are some details:

• LGES, which supplies Tesla, General Motors and Hyundai Motor among others, has been grappling with a prolonged slowdown in EV demand. GM, one of its key customers, is reportedly delaying its next-generation full-size electric truck programme indefinitely.

• In May, Reuters reported that Ultium Cells, the Ohio battery joint venture between LGES and GM, was delaying the return of hundreds of workers because of continued weak EV demand.

• Revenue would likely rise 24.8 per cent to 7.6 trillion won from a year earlier, according to LGES' regulatory filing.

• The quarterly earnings guidance includes tax credits provided under the U.S. Inflation Reduction Act for the company's battery production in the United States, LGES said in a statement. Excluding those credits, the company would have posted an operating loss of 128 billion won.

• To cushion weakness in the EV market, LGES has been expanding its energy storage systems (ESS) business, where demand is being supported by rising electricity needs for AI data centres.

• Analysts said AI-driven data centre demand for ESS is emerging as a structural growth driver for battery makers, with margins likely higher than those for EV batteries. However, they cautioned that ESS demand remains too small to fully offset weak EV battery demand in the near to medium term.

• In May, LGES signed a 2 trillion won deal to supply 6 gigawatt-hours (GWh) of ESS batteries over about two years to Michigan-based utility DTE Energy. DTE Energy plans to use the batteries for eight major power grid projects, including an AI data centre project for Oracle.

• LGES said it plans to announce detailed results on July 30.

($1 = 1,528.9000 won)