As LG Energy Solution continued a loss-making trend in the fourth quarter of last year (October to December), falling short of market expectations, the securities industry on the 12th said that, amid sluggish electric vehicles (EVs) and uncertainty over North American joint plants, a shift centered on energy storage systems (ESS) will serve as a pillar for this year's results.
LG Energy Solution disclosed on the 9th that, on a consolidation basis for the fourth quarter of last year, it posted preliminary revenue of 6.1415 trillion won and an operating loss of 122 billion won. Revenue fell 4.8% from a year earlier, and the loss-making trend continued. The amount of the Advanced Manufacturing Production Credit (AMPC) reflected in the results was 332.8 billion won. Excluding this, the fourth-quarter operating loss came to 454.8 billion won.
Choi Tae-yong, an analyst at DS Investment & Securities, said, "Shipments of pouch-type batteries for EVs declined due to the end of U.S. electric-vehicle subsidies, making a drop in utilization unavoidable," and explained, "ESS saw continued shipment growth on solid demand, but profitability temporarily weakened as related expense was recognized on a deferred basis due to production disruptions from the Georgia plant detention incident."
The outcome of talks on Ultium Cells Plants 1 and 2 in the first half is expected to determine this year's performance level. With General Motors (GM) scaling back its EV business, the operation of the two plants has become uncertain, and the shutdown duration and support terms could vary depending on the negotiations.
The continued cancellations of orders by major clients such as Ford, making the reshaping of the EV market more visible, is also a burden. Analyst Choi assessed that the variable of Ultium Cells Plants 1 and 2, which account for about one-quarter of total production capacity (CAPA), will increase short-term performance pressure and the uncertainty of pouch results for EVs this year.
In the securities industry, the prevailing view is that this year will be a year of holding up through a shift centered on energy storage systems (ESS). Analyst Lee Anna at Yuanta Securities Korea said, "With EV-directed revenue expected to decline this year, ESS and small batteries will play a role in defending results," and added, "Despite improved utilization at the European plant, the sharp drop in utilization at North American plants will limit the improvement in companywide EV results."
Lee expected the product mix improvement effect from converting lines to ESS to gather pace in the second half. With North American ESS production capacity expanding to more than 40 GWh by the end of the year, the share of ESS in companywide revenue is also expected to rise to the low-to-mid 10% range.
Lee said, "This year will be when fierce order competition and the resulting margin pressure peak," adding, "Given the rapid shift to ESS centered on U.S. plants, the possibility of additional orders, and the potential to emerge as a winner after corporate restructuring, continued attention is needed."