Battery maker LGES offers guidance for 2025 after slow demand for electric vehicles led to lower third-quarter profits

Heekyung Yang and Joo Min Park

SEOUL (Reuters) – South Korean battery maker LG Energy Solution said on Monday it has a “conservative” view of revenue growth next year and that it will significantly cut capital spending due to slowing demand for electric vehicles, after the third quarter it recorded 39% revenue growth. drop in profits.

The company, which supplies Tesla, General Motors and Hyundai Motor, also expects the results of next week’s U.S. presidential election to have a significant impact on the direction of the electric vehicle market, its chief financial officer said.

“Looking ahead to 2025, we see continued macroeconomic uncertainty and geopolitical risk, increased exports (of batteries) from Chinese competitors, and plans by customers (automakers) to produce their own batteries, which will increase competition,” Chief Financial Officer Lee Chang said in a statement. Seal said on the earnings call.

“In terms of revenue growth next year, we have a fairly conservative forecast,” Lee said. “We expect capital expenditure next year to be significantly reduced compared to this year, with the exception of some significant and necessary investments.”

In April, LGES said it plans to cut capital spending this year due to slowing growth in electric vehicle sales. Earlier this year, the company also said that capital expenditure in 2024 would be similar to last year’s 10.9 trillion won.

Some automakers are scaling back electrification targets, hit by slowing demand for electric vehicles caused by factors including a lack of affordable models, slow adoption of charging stations, trade tensions and increased competition from cheaper Chinese rivals.

Demand is likely to recover in about 18 months in Europe and two to three years in the United States, depending in part on climate policy and other regulations, a senior LGES executive told Reuters in July.

“The general consensus is that the rate of growth in demand for electric vehicles may slow if Donald Trump is elected to a second term in the White House (compared to what it was under Kamala Harris) as he has proposed cutting tax credits for electric vehicles,” said Analyst Kang Dong. Jin from Hyundai Motor Securities.

EXCEEDS ESTIMATES

LGES said operating profit for July-September was 448 billion won ($322.84 million), in line with its earlier forecast but less than 731 billion won in the same period a year earlier.

However, improving demand from some European and North American automakers helped the battery maker beat LSEG SmartEstimate of 374 billion won, calculated based on the average of 20 analysts’ estimates and weighted by analyst estimates that are more accurate.

LGES said it would have posted an operating loss of 18 billion won for the quarter if not for a tax credit received under the US Inflation Relief Act.

Revenue fell 16% to 6.9 trillion won.

LGES’s share price was up 1.2% after the results were released, outpacing a 0.9% rise in benchmark KOSPI shares.

($1 = 1,387.6900 won)

(Reporting by Heekyung Young and Joo Min Park; Editing by Sonali Paul and Christopher Cushing)