LG Energy Solution’s first-quarter net profit halved due to material costs and supply chain challenges, ahead of strong EV market – pv magazine USA

Battery specialist plans to boost smart battery manufacturing and make strategic investments in materials to cut costs and boost profits

LG Energy Solution announced earlier this year that it was exiting the solar module business due to rising material and logistics costs, and would now focus on energy storage systems and management. household energy. In its first-quarter earnings report, the company announced quarterly revenue of 4.34 trillion South Korean won (KRW), or approximately US$342 million, and operating profit of 204 million, although revenues have declined.

Despite demand for its cylindrical battery cells and increased productivity from its automated manufacturing system, the company said consolidated revenue was down 2.2% in the quarter and profit net had been halved from a year earlier to $204 million. The company achieved an operating margin of 6%.

LG Energy Solution attributed the decline in revenue to rising raw material costs, the continued global shortage of semiconductors and supply chain disruption caused by the military conflict between Russia and Ukraine and periodic COVID lockdowns. The priority policy for replacing recalled batteries also reduced sales in the first quarter. Material costs have been a challenge for battery makers, with nickel, lithium and cobalt prices escalating. LG Energy Solution said the company nevertheless posted stable operating profit.

In the future, LG Energy Solution’s annual sales target is $15. 1 billion, an increase of 8% over one year, mainly due to the boom in the electric vehicle market. The company currently has an order book of $236 billion, with many major automakers as customers.

“Despite the global economic uncertainties, LG Energy Solution will continue to make prudent investments to improve product quality and increase product competitiveness,” said Youngsoo Kwon, CEO of LG Energy Solution. “As a responsible and loyal company to our partners, shareholders and investors, LGES will lead the energy industry towards a battery-powered future with unparalleled competitiveness.”

The company plans to invest around KRW 7 trillion to increase its battery manufacturing capacity to 200 GWh this year, with a target of 520 GWh by 2025. By region, the company’s battery capacity in 2025 would represent 41% in North America, which would be the largest share in the region, 37% in Asia and 22% in Europe. Last month, for example, the company announced plans to invest approximately $1.4 billion (US) to build a factory in Queen Creek, Arizona, to manufacture cylindrical batteries. Construction of this 11 GWh capacity site is expected to begin in the second quarter of this year, with mass production plans expected in the second half of 2024. The cylindrical batteries will be supplied to manufacturers of electric vehicles as well as service companies. North American power tools.

All of the company’s manufacturing facilities will be transformed into smart factories to reduce costs while enhancing manufacturing competitiveness. The new Arizona factory will be a fully automated smart factory with remote support, manufacturing intelligence, logistics automation, and more.

To improve profitability despite rising material prices, the company said it plans to secure raw materials through long-term deals and strategic equity investments. To ensure product competitiveness, LG Energy Solution is working on developing technology to better control thermal propagation in pocket batteries. The company is also developing new cathode materials, while introducing high-capacity cylindrical battery cells in new form factors.

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