LG Energy Solution expands quickly and is profitable. In 2021, it should be bigger than all the other LG Chem divisions combined.
In Q4, the company increased its revenues by 19.9% year-over-year to a new record of 8,886 billion KRW ($8.04 billion), although the profits and income are lower than in Q3:
- operating profits: 674 billion KRW ($610 million), turn around
- net income: 61 billion KRW ($60 million), turn around
The reason for that might be the one-off cost of splitting off the battery unit - LG Energy Solution, and the cost of battery recalls (EVs and energy storage).
Energy Solution's revenues highly increased to another new record:
- revenues: 4,128 billion KRW ($3.74 billion), up 66% year-over-year
"Energy Solution" stands for 46% of total revenues
- operating profits: 116 billion KRW ($110 million) or 2.8% of sales
Both sales and profitability are expected to improve in the future.
The year 2020 was quite successful for LG Chem:
- revenues: 30,058 billion KRW ($27.21 billion), up 9.9% year-over-year
"Energy Solution": 12,356 billion KRW ($11.19 billion), up 48% year-over-year
"Energy Solution" stands for 41% of total revenues
- operating profits: 2,353 billion KRW ($2.13 billion), up 185% year-over-year, margin of 7.8%
"Energy Solution": 388 billion KRW ($350 million), turn around, margin of 3.1%
- net income: 1,086 billion KRW ($980 million), turn around, net margin of 3.6%
More detailed view:
2021 Business Outlook
LG Chem forecasts that in 2021 "everything" should be even bigger and better than in 2020. Sales should increase by 24.1% to 37,300 billion KRW (over $33.7 billion).
The Energy Solution for the very first time will be responsible for more than half (50.6%) of the total revenues - 18,900 billion KRW ($17.1 billion), expanding by 52% year-over-year. Of course, only time will tell whether it will really happen.
"Energy Solutions expects the growth of the EV market to continue and the ESS market to expand centering on large power grids according to the eco-friendly vehicle policy directions of leading countries around the world, and thus anticipates revenue to grow by more than 50% this year as new EV models are released, EV sales grow, and with increased overseas orders for ESS. There are also plans in place to reinforce preparations for the future through e-Platform businesses, development of next-generation batteries, and constructing cooperative relations."
Anyway, one very important thing is that LG Chem's EV battery business is profitable, which was not the case in 2019. This should encourage increased investments in technology and production capacity.