South Korean tech giant LG Energy Solution expects stronger demand in North America in 2023, considering its 2022 record-high annual consolidated revenue and operating profit.
During the company’s conference call on January 27, the EV battery maker announced plans to hit 25-30% growth in revenue to approximately 33.3 trillion won ($27 billion) in 2023.
“LGES’ presentation today, in fact, suggests that this year would not be typically bad for the company thanks to strong demand in North America, even if we factor in an expected slow EV demand in Europe, where we would likely see gloomier macro situations than other major markets. It has become clearer that LGES’ focus would be North America.”
Cho Hyunryul, Samsung Securities’ senior analyst
LGES Q4 2022 and FY profit
The fourth-quarter profit of LGES tripled as it increased production to deal with a significant backlog of orders from automakers. It had a consolidated revenue of KRW 8.54 trillion and an operating profit of KRW 237.4 billion. These figures marked a significant year-on-year increase of 12% and 92%, respectively.
As for FY 2022, the company had a consolidated revenue of KRW 25.6 trillion and an operating profit of KRW 1.2 trillion. These figures represent a YoY growth of 43.3% and 57.9%, correspondingly.
The surge in demand occurred as EV makers were eager to expand their share of the expanding EV market. LGES currently co-owns North American battery production plants with automakers like GM, Honda, and Stellantis.
Interestingly, the company claims that last year’s order backlog reached 385 trillion won ($313 billion) by late December. Notably, that figure surpassed its estimated revenue in 2023 by over 11 times.
“A record-high annual revenue was made possible, as battery shipment has increased across all product line-ups in our proactive response to the increased demands for EVs and power grid energy storage systems (ESS).”
Chang Sil Lee, LG Energy Solution’s CFO
To put things in perspective, the South Korean company currently supplies EV juggernauts like Tesla, GM, and others.
LGES to increase capex by more than half from last year’s value
Apart from increasing its revenue target, LGES also announced plans to boost its capital expenditure (capex) by over 50% this year.
“We aim to meet our annual target revenue mainly through the expansion and stable operation of global manufacturing facilities, as well as sales expansion in the North American region. We will also continue to enhance the operating profit by improving the cost curve and advancing differentiations in product competitiveness.”
LGES
Could the recent EV price cuts affect battery costs?
LGES assured that Tesla’s recent EV price cuts would only have a limited impact on EV battery prices in general. In fact, it pushed EV demand to surge as many customers were encouraged to buy Tesla EVs during the price cuts.
The South Korean firm also shared its projection for North America to account for almost 50% of its global battery production capacity in the coming years. It further stated expectations of around 540 gigawatt hours (GWh) production capacity annually by the end of 2025.
In the US, EV demand is indeed growing rapidly. Likewise, there is a corresponding rise in demand for EV batteries. Given that the US provides compelling incentives for the industry, it is not surprising that foreign businesses like LGES view it as a potential market for growth.
($1 = 1,232.3200 won)
