This article first appeared on GuruFocus.
Revenue: Increased by 1% QoQ to KRW6.6 trillion.
Operating Loss: KRW207.8 billion with a negative operating margin of 3%.
Net Loss: KRW945 billion.
Incentives: Decreased by more than 40% QoQ to KRW189.8 billion.
Total Assets: Increased by KRW4.7 trillion to KRW71.8 trillion.
Liabilities: Increased by KRW4.1 trillion to KRW41.9 trillion.
Cash Flow: Cash inflow of KRW1.7 trillion; cash as of Q1 stood at KRW3.7 trillion.
CapEx: Decreased by 47% YoY to approximately KRW1.6 trillion.
Order Backlog: Increased to over 440 gigawatt hours as of end of April.
Release Date: April 30, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
LG Energy Solution Ltd (XKRX:373220) reported a 1% quarter-over-quarter increase in company-wide revenue, reaching KRW6.6 trillion, driven by robust ESS and cylindrical battery demand.
The ESS battery business showed significant growth, with revenue contribution jumping to mid-20% of the company’s total revenue, and is expected to expand to mid-30% by year-end.
The company secured an additional power grid project in North America, scheduled to start supply in 2028, with improved energy density and cost competitiveness.
LG Energy Solution Ltd’s order backlog increased from 300 gigawatt hours to over 440 gigawatt hours by the end of April, indicating strong future demand.
The company is actively expanding its ESS production capacity in North America, planning to secure more than 50 gigawatt hours of production capacity by year-end.
Negative Points
Despite efforts, LG Energy Solution Ltd recorded a large operating loss of KRW207.8 billion with a negative operating margin of 3% due to North American ESS production site expansion and initial ramp-up costs.
The company faced a non-operating loss of KRW650.8 billion, largely due to the sale of obsolete assets and interest expenses.
The ongoing conflict between the US and Iran has increased supply chain uncertainty and logistical costs, impacting the battery industry.
The North American EV battery demand remains weak, with conservative inventory management by a major customer leading to a temporary suspension of JV production.
Rising metal prices and a strong US dollar pose challenges, although the company is taking measures to hedge against these risks.
Q & A Highlights
Q: How do the second-quarter trends compare to the first quarter, and what is the full-year 2026 outlook? A: (Chang Sil Lee, CFO) In Q2, North American ESS demand remains strong, and we expect significant ESS shipment increases. EV battery demand in the US is slow, but European demand for mid-nickel and hybrid vehicle batteries is robust. We anticipate over 10% QoQ growth in Q2. Despite external cost pressures, we aim to turn profitable excluding IRA benefits. For 2026, we expect 15-20% top-line growth, driven by ESS demand and strategic customer expansion.
Q: What are the expectations for the ESS business in North America in terms of volume and profitability? A: (Kim Minsu, Senior Project Manager) Our ESS order book reached 140 GWh, and we expect meaningful volume growth throughout the year. Despite initial ramp-up costs and external cost pressures, we focus on stabilizing yield and cost-saving efforts to improve profitability.
Q: How is the US-Iran conflict impacting downstream demand, and how is the company positioning itself? A: (Chang Sil Lee, CFO) The conflict may prolong, but our pre-emptive local production capabilities limit direct operational impact. We expect increased logistics costs and inflation. We are reducing costs and optimizing SCM. EV demand may rise due to oil price volatility, and we are prepared to address market changes.
Q: What are the expectations for the cylindrical battery business, especially with Tesla, and preparations for the Arizona 46-series production? A: (Unidentified Company Representative) Cylindrical demand is strong due to new EV models and rising oil prices. We expect robust top-line trends. The 46-series production in Arizona is set to start by year-end, with large orders secured from European OEMs.
Q: What are the plans for ESS capacity in North America, and is there a risk of oversupply? A: (Kim Minsu, Senior Project Manager) We plan to reach 50 GWh of ESS capacity in North America by year-end, with additional space for expansion. Given the expected 20% CAGR in grid-related demand and limited local supply, oversupply is unlikely.
Q: What preparations are being made for prismatic and sodium batteries, and what is the competitive edge? A: (Lee Eong, Business Strategy) We plan to launch prismatic batteries for ESS by 2027 and are developing EV prismatic batteries with LFP and LMR chemistry. Sodium batteries are in early development, with potential benefits in cost and performance. Our R&D expertise positions us to meet market needs.
Q: How are increasing metal prices and a strong US dollar impacting the business? A: (Chang Beom Kang, Chief Strategy Officer) Metal price increases will gradually reflect in ASPs. We mitigate impact through pass-through pricing and hedging. A strong US dollar positively impacts top-line and P&L, with FX risks hedged through forward transactions and swaps.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.