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| LG Chem and SK Logos. Korea Times file |
By Kim Hyun-bin
Heavy investments in the electric battery sector is expected to pay off in the coming months with some major powerhouses able to overcome their first quarter deficit in the second quarter due to a surge in global demand for electric vehicles (EV).
Three major EV battery firms LG, Samsung and SK are set to release their second quarter earnings this week.
Samsung SDI will be the first, July 28, followed by SK Innovation and LG Chem, July 31.
LG Chem, the world's leading EV battery maker, is expected to have the best earnings among the three with a turnaround from its first quarter loss of 51.8 billion won.
According to KTB Investment & Securities, LG Chem is predicted to earn a 59 billion profit for the second quarter and is expected to continue its positive run in the latter half with a third quarter forecast at 143 billion and fourth quarter, 257 billion won.
Other major securities firms predict records profits of between 48 billion to 85 billion won in the second quarter.
The rapid growth is attributed to the enhancement of LG's Poland plant and an increase in demand for Tesla vehicles which use LG-supplied EV cylindrical battery cells.
Samsung SDI which develops mid- to large-size batteries is expected to suffer a 40 billion won to 60 billion won deficit just in the battery sector for the second quarter, but is set to make a comeback in the third.
"The European EV market is expected to surge in the third quarter along with the enhancement of the company's cost structure from fully operating its plants, which will increase efficiency," Kim Ji-san, an analyst at Kiwoom Securities said.
SK Innovation, which entered the EV battery market the latest among the three firms, will continue to face losses due to heavy investments in overseas plants and initial costs.
The securities circles expects an up-to-120 billion won deficit for the second quarter.
Despite the current losses, the continuous battery investments are expected to increase total sales in the near future. SK is currently building several battery plants both locally and overseas including in the U.S., Hungary and China. Once the plants are in full operation it will increase its supply rate over threefold from the current 20GWh to 71GWh by 2023.
Industry watchers say SK has been swiftly increasing its operation ratio and expects the company performance to be in the black starting 2021.
