LG Energy Solution announced this business direction during a third-quarter earnings conference call held on the 3rd. Lee Chang-sil, Executive Vice President and Chief Financial Officer (CFO), stated, “We plan to maximize operational efficiency with limited resources by strengthening our strategy of ‘selection and concentration.’”
LG Energy Solution’s third-quarter consolidated revenue was 9.6434 trillion won, and operating profit was 756 billion won, representing year-over-year increases of 59.0% and 25.7%, respectively. Compared to the previous quarter, revenue rose 27.6% and operating profit surged 567.3%.
Amid a significant increase in ESS shipments, expanded sales of pouch and cylindrical batteries for electric vehicles drove revenue growth. Improved capacity utilization at the Polish plant and enhanced productivity at the new ESS production hub in North America also contributed to improved profitability. Excluding production subsidies in North America—including the U.S. Advanced Manufacturing Production Tax Credit (AMPC)—totaling 416.9 billion won, operating profit stood at 339.1 billion won. However, net income turned to a loss of 296.9 billion won.
The growth momentum in the ESS sector is expected to continue into the fourth quarter. LG Energy Solution projected that fourth-quarter ESS shipments would increase by approximately 40% compared to the previous quarter, and company-wide revenue would rise by about 10%. However, the company anticipated that profitability would slow slightly due to the initial fixed-cost burden associated with the additional operation of ESS production lines at the Honda joint venture and the expiration of one-time factors from the third quarter.
Expanding ESS Orders in North America… Securing Profitability Through Production Efficiency
In response to the growth of the North American ESS market, LG Energy Solution is converting its electric vehicle battery production lines for ESS use. Through this, the company plans to expand its North American ESS production capacity—currently over 50 gigawatt-hours (GWh) at the end of this year—to over 70 GWh by the end of next year. The company is prioritizing the use of existing production facilities to respond to changes in demand rather than building new plants.
Its order backlog is also expanding. As of the end of the third quarter, the ESS order backlog stood at approximately 160 GWh. Recently, the company signed its first direct supply contract for battery energy storage systems (BESS) with a major tech firm and was selected as a “DSX Ready BESS Partner” by NVIDIA.
In particular, based on its ESS production capacity in North America, the majority of supply volumes through 2028 have already been secured. The company explained that, as additional demand—driven primarily by AI data centers and hyperscalers—exceeds available supply, it is currently discussing new orders focused on future production volumes.
However, the cost burden resulting from rapid production capacity expansion remains a challenge. This is because the simultaneous operation of production lines across multiple manufacturing sites has increased initial fixed costs, causing the pace of profitability improvement to fall short of market expectations. The company plans to complete the stabilization of major ESS cell production lines by the end of this year and further strengthen pack and link production capacity to gradually reduce the burden of fixed costs.
Reducing Investment Burden and Strengthening Supply Chain Competitiveness
LG Energy Solution will focus on reducing future capital expenditures and maximizing the utilization rates of existing production facilities. Cumulative capital expenditures through the third quarter of this year totaled 3.8 trillion won, a 53% decrease compared to the same period last year. Since a significant portion of investments in major production facilities has already been executed, the company plans to reduce the burden of additional investments and focus on improving cash flow.
Ensuring financial soundness is also a key priority. The company has no plans for additional borrowing at the corporate level this year and intends to minimize funding needs next year as well. Funds secured through improved operating cash flow will be prioritized for debt repayment.
At the same time, in response to U.S. policies aimed at strengthening non-Chinese supply chains, the company will diversify its sources of key materials, such as cathode materials, and work to reduce raw material and logistics costs. In Europe, the company plans to strengthen its local production system, centered on its Polish plant, and begin producing 46-series cylindrical batteries starting in 2029.
Vice President Lee stated, “We will focus on improving operational efficiency and maximizing capacity utilization within our existing production capacity, while simultaneously strengthening our structural cost competitiveness.”
