LG Energy Solution, South Korea’s prominent battery manufacturer, reported a 31% decline in net profit for the fourth quarter of 2023, primarily attributed to a slowdown in the demand for electric vehicles (EVs). The company’s net profit dropped to 190.3 billion won ($142 million) from 275.6 billion won in the same period of the previous year.
The slowdown in EV sales and declining metal prices, which impact car battery prices, contributed to the quarterly profit decline. Despite these challenges, LG Energy Solution witnessed a significant boost in operating profit, which surged 43% year-on-year to 338.2 billion won in the fourth quarter. The increase was attributed to U.S. tax credits and robust sales in the United States.
LGES benefited from increased production and sales of car batteries in the U.S., coupled with local tax credits, leading to higher operating income. The U.S. tax credits were associated with the Inflation Reduction Act signed into law by President Joe Biden in August 2022, offering incentives for battery components assembled in North America.
Sales for the December quarter fell 6.3% to 8 trillion won from 8.54 trillion won a year ago. However, for the entire year 2023, net income more than doubled to 1.64 trillion won from 779.8 billion won in the previous year.
Operating profit for the full year surged by 78% to 2.16 trillion won, marking the first time the company achieved annual operating income exceeding 2 trillion won since its foundation in 2020. Sales for 2023 also exceeded 30 trillion won.
Looking ahead, LG Energy Solution has set a growth target of 4 to 6 per cent for sales in 2024. The company plans to maintain a similar capital expenditure (CAPEX) as the previous year, which was 10.9 trillion won. Recognizing a potential slowdown in the global economy impacting the EV market, LGES aims to enhance its product portfolio by introducing nickel-rich NCMA (nickel, cobalt, manganese, aluminium) lithium-ion batteries and lithium iron phosphate (LFP) batteries.
The addition of LFP batteries, known for enhanced safety features, high energy density, and longer lifespan, is part of LG Energy Solution’s strategy to navigate evolving market conditions. The company operates globally with facilities in North America, South Korea, Poland, China, and an upcoming plant in Indonesia, demonstrating its commitment to the evolving landscape of the EV and battery market.