LG Energy Solution's earnings fall short of market consensus

LG Chem to beef up battery material biz

By Baek Byung-yeul

LG Energy Solution posted lower-than-expected earnings in 2021 due to the prolonged shortage of automotive semiconductors and soaring prices for battery materials. The battery maker said Tuesday it will work on improving its battery manufacturing capability by increasing facility investments this year.

The battery company said its 2021 sales came to 17.85 trillion won ($14.9 billion) while posting an operating profit of 768.5 billion won. Its October-December sales and operating profit came to 4.43 trillion won and 75.7 billion won, respectively.

At the beginning of 2021, the company announced its estimate for sales that year could come to 18.9 trillion won, but ultimately it failed reach that goal, increasing by 42 percent compared the year before.

“It fell slightly short of its 18.9 trillion won sales target for 2021 due to unfavorable external business factors such as the automotive semiconductors shortage and rising prices of major raw materials,” the company said. “However, thanks to efforts to improve productivity and rising global demand for electric vehicles, sales rose 42 percent from 12.57 trillion won in 2020.”

LG Energy Solution is one of the world's top electric car battery makers, along with its competitors such as CATL of China, Panasonic of Japan and Korea peers including Samsung SDI and SK on. Thanks to investors' expectation that the demand for batteries will keep rising, the company became the second-largest market cap company in the country's stock market right after it was listed on the KOSPI on Jan. 27.

For 2022, the company aims to hit a sales target of 19.2 trillion won. The company set the sales target reflecting increasing demand for electric cars, expanded sales of cylindrical battery cells, the ongoing automotive chip shortage issue and battery cells to be used first in recalled vehicles.

To improve its manufacturing capacity, the company will spend 6.3 trillion won in facility investments, up 58 percent from 4 trillion won in 2021.

“We will do our best to improve quality and secure profitability, which is the most basic value of a company. Also, we plan to bolster investments in future preparations,” said Kwon Young-soo, vice chairman of LG Energy Solution.

LG Chem tries to distance itself from LGES

LG Chem, the parent company of LG Energy Solution, also revealed its business strategy for 2022, saying it aims to boost sales to 60 trillion won in 2030, up by more than 130 percent from 26 trillion won in 2021.

The ambitious goal will be achieved by increasing the proportion of new businesses with high added value, such as eco-friendly materials, materials used for batteries and new drug development, LG Chem Vice Chairman Shin Hak-cheol told investors.

“LG Chem has diversified its business portfolio from batteries to high-tech materials and bio according to the flow of the industry, and has achieved sales growth by more than 10 times over the past 20 years,” Shin said.

We are now in the great reset of the industry due to the climate crisis, digital transformation and pandemic issues and this will be a big opportunity for LG Chem to become a top global science company,” he added.

Among the core growth pillars, Shin said the battery materials business aims to post 21 trillion won in sales in 2030 by focusing on improving production capability for cathodes and separators, two core materials used in battery cells.

In 2021, the company generated 42.65 trillion won in sales, and posted an operating profit of 5.25 trillion won.