Seoul: LG Energy Solution Ltd. announced on Thursday that it experienced a net loss in the first quarter compared to the previous year, primarily due to declining global demand for electric vehicle (EV) batteries impacting its earnings. For the initial three months of this year, the company reported a net loss of 944 billion won (US$635.8 million), a significant shift from a net profit of 227 billion won recorded a year ago.
According to Yonhap News Agency, the company's quarterly performance was adversely affected by reduced sales of EV batteries to key clients and increased expenses related to the initial ramp-up of an energy storage system (ESS) plant in the United States. The firm also reported an operating loss of 207.8 billion won, contrasting with an operating profit of 374.7 billion won during the corresponding period last year. Additionally, sales decreased by 2.5 percent, reaching 6.55 trillion won from the previous 6.72 trillion won.
During a conference call, LG Energy Solution revealed that it secured a contract in the first quarter to supply over 100 gigawatt-hours (GWh) of its 46-series cylindrical batteries, increasing its total order backlog to more than 440 GWh. The company, however, did not disclose the identity of the client. Market analysts speculate that these batteries might be used in next-generation EVs by BMW, which would signify the first such agreement with the German luxury car manufacturer if confirmed.
Industry insiders indicate that LG Energy Solution is expected to provide approximately 10 GWh annually over a span of up to 10 years, in a deal potentially valued at over 10 trillion won. The South Korean battery manufacturer has been supplying batteries to companies like Mercedes-Benz, China's Rivian Automotive, Inc., and Chery Automobile Co., among others.
Last month, Chief Executive Kim Dong-myung announced plans to repurpose some EV battery production capacity to manufacture ESS products, as a response to the waning demand from the automotive sector. As part of this strategy, a segment of the EV battery production line at its Ultium Cells plant in Tennessee has been converted to produce ESS systems.
Kim further explained at a shareholders meeting last month that the company aims to increase the share of ESS and new businesses to the mid-40 percent range over time, from approximately 20 percent at present, in order to develop a more stable and balanced portfolio.