LG Energy Solution posts Q2 profit without US tax credits

LG Energy Solution's power grid ESS battery container products / Courtesy of LG Energy Solution

LG Energy Solution is expected to post an operating profit in the second quarter without relying on U.S. tax benefits, driven by strong battery sales in the United States, the nation’s leading battery maker said Monday.

Operating profit likely surged to 492.2 billion won ($361.2 million) from April to June, up 195.3 billion won from a year earlier, despite a 9.7 percent drop in revenue to 5.56 trillion won from 6.16 trillion won amid an overall slowdown in electric vehicle (EV) sales.

The turnaround is especially notable as the projected profit excludes tax credits from the U.S. Inflation Reduction Act. The company has benefited from the law’s Advanced Manufacturing Production Credit (AMPC).

Tax benefits received under the AMPC amounted to 490.8 billion won in the second quarter. Excluding the AMPC credits, the company’s operating profit stood at 1.4 billion won — the first time it has posted a profit without the subsidies since the fourth quarter of 2023, when it logged 88.1 billion won.

“Increased shipments of battery products for our customers, including Hyundai Motor, Kia and General Motors, in the U.S. boosted quarterly earnings,” a company spokesperson said.

The company plans to release its final earnings results for the second quarter later this month.

The profit improvement is also attributed to increased sales of high-margin products to North American clients, the launch of local production of energy storage system (ESS) batteries and ongoing cost-cutting efforts. LG Energy Solution began mass production of lithium iron phosphate (LFP) batteries for ESS at its plant in Holland, Michigan, last month.

Despite uncertain demand from customers, it plans to boost earnings in the second half of the year by increasing production of new battery types for European EV makers and growing local ESS production in North America. The company also plans to improve profits by cutting costs, focusing EV sales on higher-profit projects and quickly meeting ESS demand using its U.S. production facilities.

“Following inventory adjustments in Europe, gradual restocking and the start of LFP supply are expected to boost production rates. ESS demand remains strong, and with North American plant production ramping up, its contribution to earnings is likely to increase,” said Lee Jin-myung, senior analyst at Shinhan Securities.