The Zhitong Finance App learned that thanks to US manufacturing incentive policies and soaring demand for energy storage systems, the initial results for the third quarter announced by South Korean battery manufacturer LG New Energy greatly exceeded market expectations. The company predicts that in the third quarter ending September, revenue will increase 59% year over year to 9.6 trillion won, better than analysts' general expectations of 8.5 trillion won; operating profit is expected to increase 26% year over year to 756 billion won, far exceeding analysts' general expectations of 365.5 billion won. LG Energy said it plans to announce detailed quarterly results on November 3.
As LG Renewables expands its energy storage system production in the US, the US production tax credit supports its performance. At the same time, subsidies for American-made electric vehicle batteries have also helped. In addition, the company's electric vehicle battery shipments to Europe have also picked up.
In terms of production capacity, LG New Energy has now set up four ESS battery production bases in North America, including the Holland plant in Michigan, L-H Battery in Ohio, Ultium Cells in Tennessee, and NextStar in Canada. Additionally, the Lansing (Lansing) plant in Michigan is also planning to start ESS battery production within this year.
With global electric vehicle battery sales weakening, LG New Energy has been shifting production capacity to energy storage systems to meet the increasing demand for electricity in data centers. At the same time, the company is also expanding the scale of production in the US to benefit from the US “Advanced Manufacturing Production Tax Credit” policy. LG New Energy said in a statement that the quarterly results guidance includes tax credits provided by the US “Inflation Reduction Act” for the company's battery production in the US. Excluding these tax credits, the company's operating profit would be 339.1 billion won.
Analysts believe that LG New Energy's better-than-expected operating profit was mainly due to a one-time profit from a North American car manufacturer. Due to weak demand for electric vehicles, the automaker failed to meet the minimum purchase commitment, so it paid compensation to LG New Energy.
Analysts also said that demand for energy storage systems in AI-driven data centers is gradually becoming a growth driver for battery manufacturers. However, they also warned that LG New Energy's energy storage system business is still in a state of loss, and that the time to turn a loss into a profit has been delayed.