[Edaily Reporter JAEMIN SONG ] LG Energy Solution returned to profitability after three quarters, driven by growth in its energy storage system (ESS) business. As idle production capacity increased due to slowing demand for electric vehicle batteries, the company’s strategy of converting some production lines to ESS production led to improved earnings. Although the company remains in the red when excluding U.S. production subsidies, analysts say it has laid the groundwork for a return to profitability by significantly reducing losses through expanded ESS shipments and higher factory utilization rates.

LG Energy Solution announced on the 30th that it recorded consolidated revenue of 7.5602 trillion won and operating profit of 113.3 billion won for the second quarter of this year. Revenue increased by 24.8% year-over-year and 15.3% quarter-over-quarter. Although operating profit fell 77.0% year-over-year, the company returned to profitability after posting an operating loss of 207.8 billion won in the previous quarter. This also ended a streak of two consecutive quarters of losses that had begun in the fourth quarter of last year.

However, the second-quarter operating profit included 241 billion won in Advanced Manufacturing Production Credit (AMPC) under the U.S. Inflation Reduction Act (IRA). Excluding this, the company posted an operating loss of 127.7 billion won. The deficit excluding the subsidy was 269.9 billion won lower than the 397.6 billion won deficit recorded in the first quarter of this year. The net loss for the second quarter also narrowed to 328.6 billion won from 944.0 billion won in the previous quarter.

The key driver behind the improved performance was ESS. As the slowdown in the electric vehicle market persisted, LG Energy Solution shifted part of its existing EV battery production capacity to ESS. As a result, ESS revenue in the first half of this year increased 4.6-fold compared to the same period last year, and its share of total revenue rose to the high 20s percent. Looking solely at second-quarter ESS shipments, they increased by more than 30% compared to the previous quarter, driven primarily by North America and Europe.

Lee Chang-sil, Executive Vice President and Chief Financial Officer (CFO) of LG Energy Solution, explained, “We returned to profitability thanks to improved capacity utilization in Europe, an increased share of high-margin cylindrical battery sales, and a reduction in fixed-cost burdens resulting from increased ESS production in North America.”

Filling the EV Gap with ESS… North American Production Hub Now Fully Operational

ESS was the key driver of this performance. As the slowdown in the EV market persisted, the strategy of converting part of the existing EV battery production capacity to ESS proved effective. In the first half of this year, ESS revenue increased 4.6 times compared to the same period last year, and its share of total revenue rose to the high 20s percent.

Order intake is also growing significantly. LG Energy Solution announced, “We secured more than 3 trillion won in new ESS orders in the first half alone, including projects for AI data centers operated by hyperscalers.”

In line with this, the company is rapidly expanding its production base in North America. Following the launch of operations at Plant 2 of its joint venture with General Motors (GM) in May, it began operating an ESS production line at its joint venture with Honda in June. The company plans to secure more than 50 gigawatt-hours (GWh) of ESS production capacity in North America by the end of the year.

In the EV battery business, the company is preparing for a rebound in demand, focusing on mid-to-low-end products and cylindrical batteries. Utilization rates at its European and Asian plants have improved as shipments of high-voltage mid-nickel and LFP batteries, as well as the 46 Series, have increased. Driven by the stabilization of 46 Series mass production and robust demand for existing 2170 products, cylindrical battery shipments also increased 1.5 times compared to the same period last year.

In the upcoming fourth quarter, the company plans to launch a 46-series production line in Arizona, USA, which offers a 50% increase in production efficiency compared to existing facilities. LG Energy Solution explained, “We plan to gradually increase the utilization rate at our North American joint venture plant and expand shipments of mid-to-low-end products from our Polish plant to boost the efficiency of our production hubs in the U.S. and Europe.”

The company is also preparing next-generation products in parallel. It will address the battery backup unit (BBU) and robotics markets with its high-power tabless 2170 products, and next year, it will supply sodium-ion battery samples to energy storage system (ESS) and automotive customers. By the end of this year, it plans to establish a pilot line using a dry electrode process to begin trial production of all-solid-state batteries.

LG Energy Solution stated, “In the second half of the year, we will focus on improving ESS profitability and expanding orders, securing order opportunities for EV batteries and improving utilization rates, as well as product enhancement and preparations for next-generation batteries.” The company added, “Based on the stable operation of our North American production hub and new orders, we will respond to market changes and accelerate our growth.”