LG Energy Solution returns to profit in Q2 on strong US demand
According to the company's preliminary earnings, from April to June, its operating profit skyrocketed 152 percent to 492.2 billion won ($360.5 million), while sales revenue slipped 9.7 percent to 5.56 trillion won from the previous year.
This figure marks the first time in six quarters that LG Energy Solution has recorded a profit when not including financial benefits from the Advanced Manufacturing Production Credit outlined in the US Inflation Reduction Act. The company posted an AMPC-excluded profit of 1.4 billion won in the second quarter.
'Several key factors have contributed to the increase in profit, including rising demand for highly profitable battery products from North American clients, local ESS production in North America and ongoing cost-saving efforts,' said an industry source familiar with the matter, on condition of anonymity.
LG Energy Solution signed an agreement with the US-based Delta Electronics to supply 4 gigawatt-hour battery cells for ESS applications, enough to power 400,000 US households for a day. The company began mass production of lithium iron phosphate (LFP) pouch cells at its Michigan plant last month, marking the first instance of a global battery manufacturer starting large-scale LFP battery production for ESS within the US.
However, the source noted that sales declined during the same period, partly due to conservative inventory management by European automakers and a drop in production volume in China. This adjustment was a strategic move to minimize exposure to US tariffs on Chinese-manufactured ESS products.
As part of its cost-reduction strategies, the battery maker decided to suspend the planned ESS investment in Arizona and instead utilize the Michigan plant earlier in the year. In response to a downturn in the global EV industry, the company also acquired a third joint venture plant with General Motors in Michigan to address the EV battery demand initially intended for LG's Michigan facility.
'We are aware of the increased external volatility from major US policy changes, which makes it challenging to predict market demand,' stated LG Energy Solution in a press release. 'However, we consider the initiation of mass production for new battery chemistry products targeting European EVs and the full-scale ESS production in North America as key opportunities to improve our earnings in the latter half of this year.'
Industry insiders suggest that the recent passage of Donald Trump's 'One Big Beautiful Bill' is expected to have a limited impact on Korean battery companies such as LG Energy Solution. This is because the AMPC is set to conclude at the end of 2031, only a year earlier than originally planned. On the other hand, the $7,500 consumer tax credit for new EV purchases under the IRA has been accelerated to this September from the end of 2032.
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