LG Energy Solution Expects Q4 Revenue to Rise 10%; North American ESS Supply Mostly Secured Through 2028

LG Energy Solution projected that its fourth-quarter revenue will increase by approximately 10% compared to the previous quarter, driven by expanding demand for energy storage systems (ESS) in North America.

With the majority of supply volumes for the North American ESS business already secured through 2028 based on currently planned production capacity, the company plans to improve profitability through a strategy of "selection and concentration" that maximizes the operation rates of existing production facilities.

LG Energy Solution announced today (Nov. 3) that it recorded 9.6434 trillion won in revenue and 756 billion won in operating profit for the third quarter of this year, bolstered by expanding North American ESS shipments and increased electric vehicle (EV) battery sales.

These figures represent increases of 59.0% and 25.7%, respectively, compared to the same period last year, with revenue marking an all-time quarterly high.

During its third-quarter earnings conference call, LG Energy Solution projected that "fourth-quarter ESS shipments will increase by about 40% compared to the previous quarter."

The company also forecasted that high-voltage mid-nickel pouch batteries and cylindrical batteries supplied to European clients will maintain a solid shipment trend.

LG Energy Solution explained, "Driven by the impact of North American joint ventures and other operations that began production in the third quarter, company-wide revenue is expected to grow by about 10% compared to the third quarter."

Through a revised disclosure, LG Energy Solution raised its annual revenue growth target for this year, including North American production subsidies, to 35% to 40% compared to the previous year.

The previous target was in the mid-10% to 20% range compared to the previous year.

The company also plans to achieve a mid-single-digit operating profit margin this year, including North American production subsidies, while cutting facility investments (CAPEX) by more than 40% compared to the previous year.

However, the company explained that some deceleration in fourth-quarter profitability is inevitable due to the disappearance of third-quarter one-off factors and initial fixed cost burdens stemming from the additional operation of the Honda joint venture's ESS production capacity.

Next year, the company expects revenue growth across all business sectors, including ESS, small batteries, and EV pouches.

ESS is expected to maintain its growth momentum based on secured order volumes, while small batteries aim to expand new customer bases for the next-generation cylindrical product, the 46 series.

Along with this, the company plans to focus on operational efficiency and maximizing operating rates within secured production capacities, while enhancing structural cost competitiveness to improve profitability.

Lee Chang-sil, Chief Financial Officer (CFO) and Executive Vice President of LG Energy Solution, stated, "We will strengthen our strategy of 'selection and concentration' to maximize operational efficiency with limited resources."

 
Building on the high growth momentum of the North American ESS market, LG Energy Solution is also accelerating additional order acquisitions.

LG Energy Solution stated, "Based on currently planned production capacity, North American ESS volumes through 2028 are mostly secured," adding, "We are actively engaging in order discussions centered around volumes beyond that period with our clients."

Major customer groups include not only existing power grid and utility operators, but also artificial intelligence (AI) data center-related clients and global big tech companies.

In particular, as customers' expected demand exceeds available production capacity, the company plans to allocate future production volumes focusing on projects with high strategic importance.

The company is also pouring efforts into strengthening production capabilities and supply chains.

In North America, to respond to ESS demand that satisfies local production and Non-Foreign Entity of Concern (Non-PFEC) requirements, the company plans to secure over 70 GWh of ESS production capacity by the end of next year by adding new prismatic lines to the 50 GWh or more capacity planned by the end of this year.

The Arizona plant, the first production base for cylindrical batteries in North America, will also continue preparations for operation by the end of the year.

The company will further expand its Non-PFEC supply chain to counter tightening U.S. supply chain regulations.

Focus is also being placed on improving financial soundness.

LG Energy Solution's debt-to-equity ratio rose from 125% in the third quarter of last year to 171% in the third quarter of this year, while its liability-to-asset ratio increased from 76% to 98% over the same period.

(Photo: Provided by LG Energy Solution, Provided by Ultium Cells, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.