Korean battery makers post sharply divergent results: LG Energy Solution hits a record, Samsung SDI Co., Ltd. turns profitable, SK On slips into the red

[Financial News] Earnings at South Korea's three battery makers are expected to diverge sharply in the third quarter of this year. LG Energy Solution is set to post its highest quarterly earnings ever, and Samsung SDI Co., Ltd. is also expected to remain profitable for a second consecutive quarter, while SK On is increasingly likely to slip back into the red. Analysts say the widening gap in profitability reflects differences in sales trends among customers and the presence or absence of one-off gains, even as growth in the energy storage system (ESS) market and a recovery in European electric-vehicle demand supported results.
According to the battery industry on the 19th, LG Energy Solution will release its final results for Q3 this year on the 3rd of next month, while Samsung SDI Co., Ltd. and SK On will announce theirs on the 29th. The market expects LG Energy Solution and Samsung SDI Co., Ltd. to have continued to improve their results, supported by the expansion of their North American ESS businesses and increased sales of high-output batteries.
In its preliminary results announced earlier, LG Energy Solution reported revenue of 9.6434 trillion won and operating profit of 756 billion won. These figures were up 59.0% and 25.7%, respectively, from a year earlier, and both revenue and operating profit marked quarterly records.
In particular, operating profit excluding the 416.9 billion won in Advanced Manufacturing Production Tax Credit (AMPC) benefits under the U.S. Inflation Reduction Act (IRA) still came to 339.1 billion won. That was about three times the 113.3 billion won recorded in the previous quarter. The improvement in profitability is attributed to expanded local ESS production in North America and a recovery in sales of electric-vehicle batteries.
The improvement in results is expected to continue through year-end. According to a compilation by Yonhap Infomax of forecasts from 11 securities firms, LG Energy Solution is projected to post Q4 revenue of 9.684 trillion won and operating profit of 572.1 billion won. This would represent a significant improvement from the operating loss of 122 billion won it recorded in the same period last year.
Samsung SDI Co., Ltd. is also expected to remain profitable. The average Q3 earnings forecast from 10 securities firms is revenue of 4.0135 trillion won and operating profit of 237 billion won. That would mark a return to profit from an operating loss of 591.3 billion won in the same period last year. After posting operating profit of 203.8 billion won in Q2 and returning to profit for the first time in seven quarters, the company is expected to continue its recovery in profitability.
The results are attributed to an expansion in domestic ESS supply and rising demand for cylindrical batteries used in power tools and battery backup units (BBUs) for artificial intelligence (AI) data centers. A settlement gain in the 100-billion-won range arising from the acquisition of a stake in the joint venture with U.S. automaker General Motors (GM) is also expected to be reflected in the results.
By contrast, SK On is expected to return to a loss in Q3. Meritz Securities estimates SK On's revenue at 1.5984 trillion won and its operating loss at 179.4 billion won. This would widen its loss from the 124.8 billion won operating loss recorded in the same period last year.
In Q2, SK On posted operating profit of 821.8 billion won, supported by compensation from customers, AMPC benefits and increased sales in Asia. However, analysts say its results deteriorated again in Q3 as one-off gains fell away and the recovery in demand for electric-vehicle batteries was delayed.
The divergence in results across the battery industry may persist for some time. Growth in the electric-vehicle market is varying by region, while the pace of ESS business expansion and utilization rates at North American production facilities have emerged as key factors determining profitability. In particular, how much companies can improve underlying profitability excluding U.S. production tax credits and one-off gains is expected to be crucial to their future earnings recovery.
[email protected] Kim Dong-ho Reporter