LG Energy Solution, Forecasts Q4 loss..."Worst since spin-off”

[Korea Financial Times, Gwak Horyung] LG Energy Solution (CEO Kim Dong-myung) is expected to turn into a deficit in the fourth quarter of this year. It has been making up for the decline in sales due to the electric vehicle chasm with 'US subsidies', but even this is facing difficulties, according to analysis.

NH Investment & Securities researcher Joo Min-woo released a corporate analysis report on LG Energy Solution on the 30th and estimated that the company would record sales of KRW 6.699 trillion and an operating loss of KRW 258.4 billion in the fourth quarter of this year.

Previously, on the 25th of last month, researcher Joo estimated sales of KRW 7.039 trillion and an operating loss of KRW 154 billion through the company's fourth quarter performance outlook. At that time, it was lower than the consensus (average of securities firm estimates), but it was further adjusted downward after just over a month.
This operating loss outlook reflects the KRW 311 billion increase in operating profit due to the Advanced Manufacturing Production Tax Credit (AMPC) of the US Inflation Reduction Act (IRA). Excluding the subsidy effect, the actual deficit due to the business amounts to KRW 570 billion.

Regarding the reason for revising the performance outlook, the main researcher stated, "European demand is expected to be weaker than expected, and sales to GM have also been lowered from the previous 40GWh to 33GWh."


Other brokerages have also recently lowered their estimates for LG Energy Solutions' fourth-quarter earnings.

Samsung Securities researcher Cho Hyun-ryul, who issued a report on the 20th, forecast sales of KRW 6.843 trillion and an operating loss of KRW 189.6 billion. He added that sales of small batteries for IT products will also be in the red, along with sluggish sales to automotive customers.


According to FnGuide, LG Energy Solution's performance consensus as of the 27th is KRW 6.7984 trillion in sales and KRW 117.6 billion in operating loss.

LG Energy Solution successfully turned a profit in its first year after spinning off from LG Chem in 2021, and has continued to see steady growth in its performance since then. Even this year, when the electric car chasm was in full swing, the company posted operating profits of KRW 157.3 billion in Q1, KRW 195.3 billion in Q2, and KRW 448.3 billion in Q3. Actual profitability was in the red, but it was supported by subsidies. If it turns into a loss even including subsidies this time, it will be the first crisis since its independence.

Accordingly, LG Energy Solution Vice President Lee Chang-sil (CFO) and Executive Director Kim Ki-soo (CHO) recently sent an email to employees declaring 'crisis management'. It is reported that they are implementing cost-cutting plans such as requiring executives to travel in economy class for short-distance overseas business trips of less than 8 hours and limiting personnel recruitment.

The industry expects LG Energy Solution's performance to gradually recover in the first quarter of next year and rebound in the second quarter. In particular, expectations are high for the success of the Tesla Model Y facelift (Juniper), scheduled to be released in January next year.
Gwak Horyung (horr@fntimes.com)