POSCO, EcoPro, L&F hit by EV slowdown

EcoPro BM headquarters in Cheongju, North Chungcheong Province / Courtesy of EcoPro BM

Shares of EcoPro, POSCO Future M, and L&F continued their steep declines on Wednesday, as data and analysts indicate that the nation's top three secondary battery materials firms are set to report significant earnings drops amid the ongoing global electric vehicle (EV) industry slowdown.

The dismal outlook has worsened further after EcoPro reported a deficit in its second-quarter earnings. As a leading EV battery materials firm, EcoPro was adversely affected by the ongoing demand slump or chasm, a term that is used to refer to the temporary stagnation in demand for EVs before their eventual mass adoption.

According to the firm's regulatory filing, EcoPro reported an operating loss of 54.6 billion won ($40 million) during the same period. The firm’s sales also plunged by 57.2 percent to 864.1 billion won.

EcoPro BM, which manufactures cathode materials considered essential for lithium-ion batteries, also reported a double-digit decline in its earnings. The key affiliate of EcoPro generated an operating profit of 3.9 billion won, down 96.6 percent from the previous year. Its sales also plummeted by 57.5 percent during the same period.

Disappointed by the sharp earnings decline, investors went on a selling spree of EcoPro BM shares over the past week. The firm’s stock price more than halved over the past year. It set a yearly high of 448,500 won per share on Aug. 1 last year but plunged to 179,900 won per share by Wednesday.

In response, the company said it is considering slowing down its ongoing investment to boost production capacity for cathode materials, as its business outlook for the second half of 2024 remains pessimistic.

“It will be difficult to see a significant rebound in our business conditions in the second half, compared with the first half,” Vice President Kim Jang-woo said during a conference call, Wednesday.

“We are reviewing a reduction and adjustment in the pace of our medium- to long-term plans to expand cathode material production capacity, in line with the slowdown in the growth of the EV industry,” he said.

POSCO Future M, which manufactures cathode materials, also suffered a drastic operating fall of 94.8 percent during the same period, with its operating profit coming in at just 2.7 billion won. The firm also reported a decline in sales to 915.5 billion won, down 23.3 percent, hit hard by the ongoing EV growth slowdown.

Analysts also revised down target stock prices for the secondary battery materials firms, as they show little sign of an immediate earnings rebound.

“POSCO Future M’s core business of cathode materials enters a cycle of prolonged slump, and the sluggish growth momentum drives down its earnings outlook,” Meritz Securities analyst Noh Woo-ho said.

L&F, another cathode materials producer, is also forecast to report an operating loss in the second quarter, marking its third consecutive quarter of losses. The firm is estimated to report a 64.7 billion won operating loss for a similar reason.

The negative outlook also drove down the stock price of the company. L&F shares extended losses in July, hitting the lowest level in 2024. The firm’s stock price hit a high of 263,500 won per share on Aug. 1 last year, but fell to 113,700 won as of Wednesday, as demand for EV battery materials is widely expected to plunge for the next couple of years.