Tesla, Inc.'s TSLA battery supplier LG Energy Solution (LGES) reported strong quarterly results amid an inclement economic and geopolitical environment. The better-than-expected results in its maiden report as a public company were helped by strong battery sales to Tesla.
What Happened: LGES, a spin-off unit from South Korea's LG Chem, said its quarterly operating profit came in at 258.9 billion Korean Won ($200 million), down about 24% year-over-year. The decline was much smaller than what many analysts had anticipated.
Revenue for the March quarter fell 2.1% year-over-year to KRW 4.34 trillion, with the company blaming the modest drop on input cost inflation, chip shortage, supply chain disruptions caused by the Ukraine-Russia war, and periodic COVID-19 lockdowns.
Prioritizing replacement of recalled batteries also hurt to some extent, the company said.
LGES noted that demand for cylindrical battery cells and higher productivity achieved from automating the manufacturing systems helped offset much of the weakness. The company supplies cylindrical batteries primarily to Tesla and provides pouch-type batteries to other customers such as General Motors Corporation GM and Volkswagen AG VWAGY, according to Reuters.
Related Link: Why More EV Price Hikes Could Be Coming In Q2
EV End-Market Buoys Guidance: LGES said it expects 2022 sales of KRW 19.2 trillion, representing an 8% growth, helped by auto customers' plans to expand EV lineups.
The company also raised its capex guidance by 10% to KRW 7 trillion, as it targets an annual production capacity of 200 gigawatt hour. By 2025, this would more than double to 520 GWh.
LGES said it plans to tackle the higher battery material prices by solidifying partnerships with suppliers — hoping to achieve this by securing long-term contracts and making strategic investments. The company also plans to add copper, aluminum and manganese as battery materials.
LGES listed its shares on the South Korean exchange following a high-profile initial public offering in late January 2022.
Related Link: Tesla Supplier CATL, Warren Buffett-Backed BYD Dominate EV Battery Market In China
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