LG Energy Solution Q3: How to cope with the slowdown in global power battery demand

LG Energy Solution's performance in the third quarter of 2024 does reflect the weakness in global demand for power batteries.

LG Energy Solution's operating income was 687.78 billion won, up 11.6% from the previous month and down 16.4% from the previous year. The following is a comparison with CATL.

Part 1

LG Performance Overview

● In the third quarter, LGES's overall revenue was 687.78 billion won, an increase of 11.6% from the previous quarter and a decrease of 16.4% from the previous year.

● Operating profit was KRW 448.3 billion, up 129.5% from the previous quarter and down 38.7% from the previous year. Operating profit included an estimated IRA tax credit of KRW 466.0 billion.

在动力电池和储能系统（Energy Storage System, ESS）两大核心业务领域取得了显著的成绩，促进了营收与利润的增长，而且在与国际顶级汽车制造商的合作及关键技术革新方面也取得了重大进展。

Faced with fierce industry competition and increasing financial challenges, LGES has also been undergoing continuous transformation, with operating profit decreasing by 38.7% year-on-year but increasing significantly by 129.5% month-on-month.

This achievement is due to the tax benefits brought by the U.S. Inflation Reduction Act (IRA), which effectively alleviated the pressure caused by rising raw material costs.

It further consolidated its market position by optimizing its cost structure and improving the profitability of its product lines, especially the contribution of power batteries and ESS businesses.

● 技术革新引领市场：LG新能源在电池技术领域不断取得突破，推出了46系列圆柱形电池和高压中镍化学体系电池，这些产品不仅满足了市场对高性能、长寿命周期的需求，还显著增强了电池的安全特性。

It is planned to introduce dry electrode technology into the large-scale production process by 2028, which is expected to significantly increase the energy density of batteries and reduce manufacturing costs.

● Diversified product lines to meet market segments: With the development of the new energy vehicle industry, LG Energy Solution has actively adjusted its product portfolio and launched a variety of battery types, including lithium iron phosphate (LFP), to meet the specific needs of different customer groups.

This strategy not only enhances the company's market competitiveness, but also lays a solid foundation for attracting more orders.

Part 2

Market expansion and business layout

LG Energy Solution has recently successfully signed battery supply contracts totaling 160GWh, involving cooperation with many well-known European and American automakers, consolidating its position as a leading global battery supplier. In particular, the strategic layout in the North American and European markets has provided a strong guarantee for the company to resist policy risks and expand market share.

In addition to traditional power systems, LG Energy Solution is also vigorously developing ESS business to meet the growing demand for energy storage in North America and other regions. The company is gradually expanding its production capacity and supply chain network in North America, aiming to achieve localized production by 2025. LG Energy Solution has also entered the field of independent power producers (IPP) and further expanded its business scope by building its first ESS power station.

Faced with financial pressures brought about by production expansion and R&D, more efficient cost control methods are being explored, such as optimizing the utilization rate of existing facilities and speeding up the commissioning of new factories.

LG新能源在多个关键领域取得了显著进展。

● Successfully developed the second-generation CTP2 high-voltage medium-nickel battery, which has significantly improved the battery’s energy density and safety, meeting the market’s demand for diversified chemical compositions and battery forms.

● Launched the BMTS3 business and started the integrated energy management business, further enriching the product line and service scope.

● In the energy storage system (ESS) business, LG Energy Solution has also made important progress, especially in meeting the long-term supply needs of power grid projects.

To stay ahead in the competitive global battery market, LG Energy Solution has proposed the following key initiatives:

● LG Energy Solution has taken a series of measures to enhance its competitiveness:

◎ The safety of electric vehicles is becoming increasingly important, so we have increased our R&D investment in materials and process technology to ensure product safety.

◎ In response to market demand for cost innovation, LG Energy Solution has optimized the cost structure of key electric vehicle components.

◎ Improve overall competitiveness through differentiated products and services, take advantage of policy advantages, and maximize the benefits of policies through localized supply chain capabilities.

● In the Energy Storage System (ESS) business area:

◎ LG Energy Solution has noticed the strong growth in market demand, especially in the power grid sector, and has established a local supply chain to meet policy and regulatory requirements. It provides cost advantages and integrated turnkey solutions to meet the diverse needs of customers.

◎ In order to further consolidate its market position, LG Energy Solution has accelerated its R&D process, focusing on the development of next-generation battery technologies such as bipolar semi-solid and all-solid-state batteries.

◎ The company also actively adjusted its operating strategy, reduced the scale of capacity expansion, optimized the utilization rate of existing factories, and ensured stable production of new factories.

◎ LG Energy Solution is also committed to enhancing supply chain competitiveness, especially in raw material procurement.

◎ In order to cope with future market changes, LG Energy Solution continues to expand its business portfolio and explore new business opportunities such as Battery as a Service (BaaS) and Energy as a Service (EaaS). The company has also established a closed-loop recycling system by region to improve resource utilization efficiency and expand opportunities in other application areas.

summary

LGES's financial report basically reflects overseas battery demand, which is currently quite average.