LGES's Q1 Earnings Is Lower Than Predicted, Despite Increased Battery Sales to Tesla

Operating profit fell to 259 billion won ($205.01 million) from 341 billion won a year earlier, according to the South Korean battery manufacturer, which also counts General Motors Co (NYSE:GM) and Volkswagen AG as customers (OTC:VWAGY).

According to Refinitiv SmartEstimate, an average of 16 analyst estimates indicated a profit of 141 billion won.

Revenue increased by 2.1 percent year on year to 4.3 trillion won.

According to LGES, revenue growth has been hampered by "increasing raw material costs, a continuous worldwide semiconductor shortage, and supply chain disruption caused by Russia's military confrontation with Ukraine and frequent COVID lockdowns."

Additionally, it stated that it maintained a consistent operating profit margin due to strong sales of cylindrical battery cells.

The company, which also supplies batteries to electric vehicle manufacturer Lucid, announced this month that it intends to invest 1.7 trillion won in Arizona by 2024 to accommodate demand from prominent startups and other North American customers.

LGES said that it has increased its capital spending budget for this year to 7 trillion won, up more than 10% from the 6.3 trillion won disclosed in February.

LGES stated that it intends to increase yearly production capacity to around 520 gigawatt hours (GWh) of batteries by 2025, which would power approximately 7.3 million electric vehicles. By the end of this year, it intends to obtain an annual capacity of approximately 200 GWh.

LGES shares, which were spun off from LG Chem Ltd in January, were down 3.1 percent at 0023 GMT, compared to the benchmark KOSPI's 1.8 percent decline. According to analysts, institutional investors sold their LGES shares on Wednesday due to the expiration of the lock-up period.

LGES stock has fallen approximately 16% since its initial public offering, as supply chain bottlenecks caused by COVID-led lockdowns in China and fighting in Ukraine have persisted.

Tesla's first-quarter earnings exceeded Wall Street expectations last week, as the company delivered record numbers of vehicles at higher prices, and Chief Executive Elon Musk stated that the company had a fair chance of attaining 60 percent vehicle delivery increase this year.

However, experts believe LGES' second-quarter performance could be impacted by Tesla's planned shutdown of its Shanghai production in accordance with COVID-19 guidelines.

Tesla said it lost around a month of build volume at its Shanghai factory and that manufacturing has resumed at a reduced capacity, affecting second-quarter overall build and delivery volume.