LG Energy Solution's Q1 profit surges on cost cuts, ESS pivot
LG Energy Solution said Wednesday it turned a profit in the first quarter, with aggressive measures to improve cost efficiency amid rising uncertainty in the US tariff policies.
According to the company's earnings release, its sales revenue and operating profit rose 2.2 percent and 138.2 percent to 6.26 trillion won ($4.38 billion) and 374.7 billion won, respectively, in the first quarter of this year. Its operating profit margin improved by 9.5 percentage points from the previous quarter, reaching 6 percent, while the Earnings Before Interest, Taxes, Depreciation and Amortization margin, representing a company's core operational efficiency, stood at 20 percent.
Lee Chang-sil, chief financial officer of LG Energy Solution, noted that the battery maker's cost innovation strategies include reducing capital expenditure and maximizing the use of the production capacity from its existing facilities.
'Regarding our recent capacity expansions at North American production sites, we have decided to put on hold the planned expansion in Arizona (for energy storage system applications) and instead utilize our Michigan plant,' said Lee during a conference call earlier in the day. 'We will also go forward with the acquisition deal for the third joint venture plant with General Motors in Lansing (Michigan) — set to close in May — to cut additional investment costs, accelerate ESS production by about a year and optimize asset utilization.'
While the demand for electric vehicles in the US is anticipated to decline due to the impact of tariffs by Donald Trump, LG Energy Solution highlighted that it will focus on expanding its ESS business there, which was previously dominated by China.
With tariffs of approximately 156 percent for Chinese batteries and over 170 percent for battery materials, the company said Chinese batteries, which have outpaced Korean companies due to competitive pricing, will be unable to enter the US. LG Energy Solution operates eight local production sites in North America, including joint venture facilities with automakers, leveraging a competitive edge over competitors heavily relying on Chinese supply chains.
The battery giant's new lithium iron phosphate (LFP) batteries for ESS, which will be manufactured from the second quarter, boast three times higher capacity and 20 percent greater energy density than short LFP cells for EVs. It expects to secure cost competitiveness after receiving the Investment Tax Credits from the US government.
In addition, the battery-maker plans to transform part of the production lines of its plant in Poland from EVs to ESS manufacturing, completing its network of ESS production sites across Asia, the US and Europe.
Prioritizing financial stability, Lee underscored that the company looks to cut its capital expenditure by more than 30 percent from 2024, greater than the originally planned 20–30 percent. This means it would reduce investments for production expansion while optimizing operational efficiency.
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