0
An energy storage system (ESS) for power grids developed by LG Energy Solution. / Courtesy of LG Energy Solution

LG Energy Solution snapped its two-quarter consecutive deficit streak that started in the fourth quarter of last year, successfully swinging back to profit in the second quarter of this year. While earnings improved on the back of expanding energy storage system (ESS) sales, the company still posted a loss when excluding the Advanced Manufacturing Production Credit (AMPC) under the U.S. Inflation Reduction Act (IRA), leaving profitability recovery as a lingering task.

LG Energy Solution announced on July 7 that it recorded a preliminary consolidated revenue of 7.5602 trillion won and an operating profit of 113.3 billion won for the second quarter of this year.

Revenue increased by 24.8% year-on-year and 15.3% quarter-on-quarter. Operating profit plummeted by 77.0% compared to the same period last year, but turned around into the black from the previous quarter's deficit.

The earnings improvement reflected the AMPC effect driven by production expansion in North America. The AMPC amount recognized by LG Energy Solution in the second quarter was 241 billion won; excluding this, the company recorded an operating loss of 127.7 billion won. This implies that without the tax credit benefit, the company has yet to escape a deficit in its core business.

Nevertheless, compared to the previous quarter, revenue posted double-digit growth and swung to profit, which is interpreted as a signal that the electric vehicle market slowdown is gradually easing and that North American production and sales are entering a recovery phase.

"The actual pace of demand recovery in the second half of the year will be the key variable for improving profitability," an industry insider said.

                                                                                                         Kim Jeong-gyu