Slowing demand for electric vehicles hit South Korean battery maker LG Energy Solution Ltd., slashing its profits by nearly 40% from last year.
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(Bloomberg) — Slowing demand for electric vehicles hit South Korean battery maker LG Energy Solution Ltd., sending its profits down nearly 40% from last year.
LG Energy’s operating profit for the three months ended Sept. 30 was 448.3 billion won ($323 million), according to a company statement on Monday. While that was above analyst estimates of 440.3 billion won, it was down 39% from a year ago, according to data compiled by Bloomberg.
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Excluding tax credits from the US Energy Savings Act, LG made an operating loss of 17.7 billion won. Revenue fell 16.4% to 6.9 trillion won.
The South Korean company has been experiencing a decline in battery orders as declining customer demand for EVs prompts automakers around the world to scale back their electric ambitions. Auto companies are also facing increasing uncertainty as the US heads to its presidential election next month, as Donald Trump threatens to overturn the EV policies of the Biden administration.
“Competition in the global EV market appears to be intensifying as macroeconomic uncertainty and geopolitical risks continue at a time when Chinese manufacturers are increasing their exports and our customers are announcing their domestic battery plans,” Chief Financial Officer Lee Chang Sil said during the call. . “The outcome of the US presidential election will also have a big impact on the market, so it is very difficult to give an opinion next year.”
Improving profits in the fourth quarter will be a challenge as its average selling prices will reflect lower steel prices, and there will be one-time costs in preparing its year-end inventory, Lee said. The company plans to reduce costs, improve overall efficiency and diversify its products to maintain its profitability, he added.
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LG expects to reduce spending next year as it plans to invest in areas of real need, Lee said.
Earlier this year, LG Energy lowered its outlook for American EV product growth this year to around 20% from its previous forecast of around 35%. The company also sees European EV production growth in the teens, weaker than its previous estimate of up to 25%.
To reduce the impact of reduced EV demand, the company is looking to diversify its business portfolio, with a plan to more than double sales by 2028 by accelerating the production of other applications such as storage systems, it said earlier this month.
Shares of LG Energy added 1% in Seoul trading on Monday, following the release of its earnings. The stock rose 27% during the third quarter, snapping five straight quarterly declines.
(Updates with top comments from section five.)
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