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(2nd LD) LG Energy Solution's profit grew more than twofold in Q1 on IRA effects

Economy 15:41 April 07, 2023

(ATTN: UPDATES last para with closing share price)
By Kim Seung-yeon

SEOUL, April 7 (Yonhap) -- LG Energy Solution Ltd. (LGES) said Friday it estimated its operating profit to have grown more than twofold in the first quarter from a year earlier, boosted by the effects of U.S. government subsidies under a new law that promotes electric vehicle (EV) purchases.

Operating income reached 633.2 billion won (US$480.1 million) in the January-March period, compared with 258.9 billion won the previous year, South Korea's top battery maker said in a regulatory filing.

Sales more than doubled to 8.74 trillion won from 4.34 trillion won in the same period. The data for net earnings was not available.

The operating profit was 26.8 percent higher than the average estimate, according to a survey by Yonhap Infomax, the financial data firm of Yonhap News Agency.

LGES said the earnings preview reflected the benefits it expects to receive from the tax credits for EV buyers under the Inflation Reduction Act (IRA) that came into force on Jan. 1 this year.

It has included in the operating profit some 100.3 billion won in tax credits it expects to see from the Advanced Manufacturing Production Credit under the IRA, LGES said.

The IRA gives up to $7,500 in tax credits to EV buyers whose vehicles were assembled in North America, and made with minerals mined and processed in the United States or countries or regions that have free trade agreements with Washington.

South Korea's battery sector is cited among those expected to benefit from the IRA.

More details will be released when it reports its final earnings later this month, LGES said.

With the implementation of the IRA, analysts expected that LGES will be able to receive nearly 1 trillion won in subsidies this year and as much as 46.5 trillion won over the next 10 years.

LGES, the world's second-largest battery maker, plans to boost its capacity to 248 gigawatt hours for U.S. production once all of its ongoing joint ventures and other projects for new and additional U.S. plants are completed.

It recently announced a decision to push ahead with the investment plan for the envisioned Arizona plants, upping the amount of investment more than fourfold to 7.2 trillion won.

Friday's earnings guidance did not provide break-down figures for sectoral performance. Analysts predicted that the small batteries division for mobility and IT devices, and the mid-to-large batteries segment for EVs saw sales grow about 3-4 percent from the previous quarter.

Operating profit in small batteries probably increased about 30 percent, with the corresponding figure for EV batteries likely to have jumped around 42 percent on-quarter.

The energy storage system was projected to have stayed in the red.

Shares in LGES closed flat at 580,000 won on the Seoul bourse Friday, versus the broader KOSPI's 1.27 percent gain. The earnings guidance was released before the market closed.

Visitors look around an LG Energy Solution booth at InterBattery 2021 at COEX in Seoul, in this file photo take June 9, 2021. (Yonhap)

Visitors look around an LG Energy Solution booth at InterBattery 2021 at COEX in Seoul, in this file photo take June 9, 2021. (Yonhap)


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