LG Energy Solution (373220) Q1 2025 earnings summary

Executive summary

• Q1 2025 revenue was KRW 6,265 billion, down 3% QoQ, but exceeded expectations due to favorable ASP and product mix despite lower shipment volume; operating profit rebounded to KRW 375 billion (6% margin), aided by cost reductions and North American tax credits.

• Net profit stood at KRW 227 billion, recovering from a loss in Q4 2024, with non-operating loss limited to KRW 10 billion due to offsetting interest expenses and FX gains.

• Assets increased to KRW 62.3 trillion, liabilities to KRW 31 trillion, and equity to KRW 31.3 trillion, with a liability-to-equity ratio of 99%.

• Negative cash flow resulted from KRW 3 trillion CapEx, mainly for North American JV capacity, reducing cash balance to KRW 3.6 trillion.

• Maintains a global presence in EV, ESS, and small battery markets, with major production and R&D hubs in Korea, the US, Poland, and China.

Financial highlights

• EBITDA margin reached 20% in Q1 2025, with EBITDA at KRW 1,232 billion.

• Gross margin improved to 16.2% from 8.2% in Q4 2024.

• Net income margin was 3.6% in Q1 2025.

• Net interest expenses of KRW 110 billion were offset by FX and derivative gains.

• R&D expense ratio was 4.9% of sales in Q1 2025.

Outlook and guidance

• Q2 expected to see continued strong U.S. sales and new cylindrical model launches, but overall top-line decline anticipated due to OEM inventory conservatism and tariff volatility.

• Full-year 2025 outlook remains highly uncertain due to policy changes and demand unpredictability; focus remains on selective investment and cost control.

• ESS capacity in North America to be fully ramped up from Q2, with new EV battery chemistries launching in Europe.

• Plans to execute only essential investments and further reduce CapEx/costs in response to potential demand downside.

• Will continue to secure future demand with new products and applications, including 46-series, prismatic, and LFP batteries.