(Bloomberg) -- Sluggish demand for electric vehicles haunted South Korean battery maker LG Energy Solution Ltd., dragging its profits down by almost 40% from a year earlier.
LG Energy’s operating profit for the three months ended Sept. 30 was 448.3 billion won ($323 million), according to a company statement Monday. While that was higher than analyst estimates of 440.3 billion won, it was down 39% from a year earlier, according to data compiled by Bloomberg.
Excluding tax credits from the US Inflation Reduction Act, LG made a 17.7 billion won operating loss. Revenue dropped 16.4% to 6.9 trillion won.
The South Korean company has been grappling with dwindling orders for batteries as falling customer demand for EVs prompts automakers around the globe to scale back their electric ambitions. Car companies are also facing mounting uncertainties as the US heads for its presidential election next month, with Donald Trump threatening to scrap the Biden administration’s EV policies.
“Competition in the global EV market is seen intensifying as macroeconomic uncertainties and geopolitical risks persist at a time when Chinese manufacturers are increasing their exports and our customers are announcing their plans for battery internalization,” Chief Financial Official Lee Chang Sil said during the conference call. “The result of the US presidential election will also have a significant impact on the market, so it’s very difficult to provide an outlook for next year.”
Improving profits in the fourth quarter will be challenging as its average selling prices will reflect dwindling metals prices, and there will be a one-off expense from adjusting its year-end inventory, Lee said. The company plans to lower costs, improve overall operational efficiency and diversify its products to sustain its profitability, he added.
LG expects to reduce capital expenditure next year as it plans to only make investments in areas that are absolutely necessary, Lee said.
Earlier this year, LG Energy lowered its outlook for American EV output growth for this year to about 20% from its previous forecast of as much as 35%. The company also see European EV production growth in the mid-teens, weaker than its previous estimate of up to 25%.
To minimize the impact from slowing EV demand, the company is looking to diversify its business portfolio, with a plan to more than double sales by 2028 through accelerating production of other applications such as storage systems, it said earlier this month.
LG Energy shares added 1% in Seoul trading Monday, following the release of its earnings. The stock rose 27% during the third quarter, snapping five straight quarterly declines.
(Updates with executive comments from fifth paragraph.)
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