Major South Korean battery makers are tipped to post strong quarterly profits in the second quarter, continuing the robust growth on the back of solid demand in North America and tax benefits from a new U.S. law on green energy, industry data showed Sunday.
Top player LG Energy Solution Ltd. (LGES) is forecast to report 742.5 billion won (US$565.9 million) in operating profit in the three months ending in June, according to a median estimate by local brokerages, compiled by Yonhap Infomax, the financial news arm of Yonhap News Agency.
That marks a 279.6 percent increase from a year earlier and 17.3 percent from the previous quarter.
The upbeat profit is attributable to the solid growth in output in North America and the effects of tax credits it would have received in the U.S. market under the Inflation Reduction Act (IRA), analysts said.
The tax credits, known as the Advanced Manufacturing Production Credit (AMPC), are applied to eligible companies under the IRA.
The IRA gives up to $7,500 in tax credit and subsidies to electric vehicles that were assembled in North America and made with minerals mined and processed in the U.S. or countries or regions that have free trade agreements with Washington.
LGES said in the first quarter the AMPC benefits amounted to 100.3 billion won.
Lee Hyun-wook, an analyst at IBK Investment and Securities Co., projected that LGES will receive about 900 billion won in AMPC tax credits this year, with the amount to increase to as much as 3.4 trillion won in 2025.
LGES' order backlog is expected to rise to more than 600 trillion won in the third quarter, from 480 trillion won in the first quarter, Kim Chul-joong, an analyst at Mirae Asset Securities Co., said.
Samsung SDI Co., a smaller rival, is expected to log 456.5 billion won in operating income in the April-June period, up 6.4 percent from a year earlier.
Its AMPC benefits will start to show when its U.S. joint venture in Indiana with Stellantis N.V. enters operation in 2025, analysts said.
SK On Co., the latecomer out of the three, will likely see its operating loss narrow significantly to 218.1 billion won in the second quarter.
A turnaround is not in the offing, but the profitability will notably improve this year with the production yields stabilizing, analysts said.
Source: Yonhap News Agency