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SEOUL (Reuters) -South Korea’s LG Energy Solution Ltd (LGES) on Wednesday reported a smaller-than-expected 24% drop in quarterly profit as strong sales of its cylindrical batteries to Tesla (NASDAQ:TSLA) Inc offset a hit to production due to chip shortages.
Operating profit declined to 259 billion won ($205.01 million) for the January-March period from 341 billion won a year earlier, said the South Korean battery giant, which also counts as customers General Motors Co (NYSE:GM) and Volkswagen AG (OTC:VWAGY).
An average of 16 analyst estimates was profit of 141 billion won, according to Refinitiv SmartEstimate.
Revenue rose 2.1% to 4.3 trillion won.
LGES, in a statement, said revenue growth was constrained by “the rising costs of raw materials, ongoing global semiconductor shortage and supply chain disruption caused by the military conflict between Russia and Ukraine and periodic COVID lockdowns.”
It also said it managed to uphold steady operating profit with solid sales of cylindrical battery cells.
The company, which also supplies batteries to electric-vehicle maker Lucid, said last month it plans to invest 1.7 trillion won to build a battery factory in Arizona by 2024 to meet demand from prominent startups and other North American customers.
LGES said it has updated this year’s capital expenditure budget to 7 trillion won, up more than 10% from a previously announced 6.3 trillion won in February.
LGES said it plans to boost its annual production capacity to about 520 gigawtt hours (GWh) worth of batteries by 2025, enough to power about 7.3 million electric vehicles. It expects to secure annual capacity of about 200 GWh by the end of this year.
Shares of LGES, carved out of LG Chem Ltd in a market debut in January, were trading down 3.1% versus, the benchmark KOSPI‘s 1.8% fall as of 0023 GMT. Analysts said that the lock-up period that expires on Wednesday led institutional investors to sell their LGES shares.
LGES stock is down about 16% since the initial public offering as supply chain disruptions have persisted due to COVID-led lockdowns in China and conflict in Ukraine.
Last week, Tesla’s first-quarter results surged past Wall Street estimates as the firm delivered record units at higher prices, and Chief Executive Elon Musk said it had a reasonable shot at achieving 60% vehicle delivery growth this year.
But analysts said LGES’ second-quarter results could take a hit from Tesla’s shutdown of its Shanghai factory due to COVID-19 protocols.
Tesla said it has lost about a month of build volume out of its Shanghai plant and that production has resumed at limited levels, which will impact total build and delivery volume in the second quarter.
($1 = 1,263.3300 won)
