LG Energy Solution (373220) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was KRW 6.162 trillion, up slightly quarter-over-quarter but down nearly 30% year-over-year, driven by North American EV and ESS battery shipment growth despite weak ASPs and lower metal prices.

• Operating profit reached KRW 195.3 billion (3.2% margin), up 24% Q/Q, supported by a doubled IRA tax credit effect; excluding the tax credit, an operating loss of KRW 252.5 billion was recorded.

• Net income for Q2 2024 was a loss of KRW 24 billion, reflecting cost pressures and lower margins.

• Revenue growth was driven by new EV model launches and ESS battery sales, with North America offsetting sluggish European demand.

• Focus remains on optimizing operations, improving profitability, and enhancing supply chain and R&D competitiveness.

Financial highlights

• Q2 2024 EBITDA was KRW 931 billion (15.1% margin), up from KRW 816 billion in Q1 2024.

• Cash balance decreased to KRW 3.87 trillion, mainly due to KRW 2.89 trillion in CapEx and working capital changes.

• Net income before tax was KRW 91 billion; net loss stood at KRW 24 billion.

• Assets increased by KRW 2.2 trillion Q/Q to KRW 51,501 billion, driven by tangible asset acquisitions.

• Gross margin declined to 11.2% in Q2 2024 from 15.1% in Q1 2024.

Outlook and guidance

• 2024 annual revenue guidance was revised to a decrease of over 20% YoY, reflecting slower shipment growth and weak ASPs.

• Expected IRA tax credit-eligible capacity for 2024 was reduced from 45-50GWh to 30-35GWh, with ramp-up speed adjusted to match demand.

• Second half expected to show meaningful growth over first half, supported by new EV launches in North America and Europe and expanding ESS sales.

• Company plans to enhance operational efficiency, adjust production expansion pace, and focus CapEx only on strategic priorities.

• Plans to optimize operations, scale down investment, and convert production lines to improve profitability.