On July 27, LG Chem announced its second-quarter results. In the second quarter of this year, the company's sales reached 12.24 trillion won, an increase of 5.6% month-on-month and a year-on-year increase of 7%; operating profit was 878.5 billion won, a decrease of 14.3% month-on-month and a year-on-year decrease of 59%.
Among them, the sales of LG Chem's new materials division in the second quarter were 2.18 trillion won, and the operating profit was 335.4 billion won. LG Chem said it achieved its highest single-quarter sales thanks to continued growth in battery material shipments and rising raw material prices. At the same time, profitability has improved due to increased shipments of high-margin products such as high-nickel cathode materials and semiconductor materials, as well as a favorable exchange rate environment.
LG Chem also predicts that in the third quarter, although the impact on profitability due to falling metal prices is unavoidable, it is expected that shipments of cathode materials will expand, and the company's new materials business unit centered on battery materials will continue to grow.
While the new materials division performed well, sales of LG New Energy, a battery company under LG Chem, also increased in the second quarter, reaching KRW 5.71 trillion, and operating profit was KRW 195.6 billion. Although sales of cylindrical batteries for automobiles have increased and raw material prices have risen, LG New Energy's sales have increased compared to the previous quarter, but due to the spread of the new crown pneumonia epidemic, due to the blockade in some parts of China and the paralysis of global logistics, profitability is not high. dropped.
LG Chem said that in the third quarter, with the launch of new models from major customers and the full launch of orders from the joint venture with GM, sales centered on strategic customers will see a substantial increase.
On the same day as the disclosure of the second quarter results, LG Chem also announced that in order to capture the fast-growing electric vehicle battery material market, LG Chem and General Motors also signed a cathode material supply agreement. According to the agreement, from the second half of 2022 to 2030, LG Chem will supply more than 950,000 tons of cathode materials to it. These cathode materials will be used in Ultium Cells, a joint venture between General Motors and LG New Energy, which can supply and manufacture about 5 million high-speed vehicles. Performance batteries for pure electric vehicles (EVs).
It is worth noting that the cathode material supplied by LG Chem this time is NCMA (nickel, cobalt, manganese, aluminum) cathode material for a new generation of power batteries. The cathode material is a product using the best material technology of LG Chem. high-performance aluminum, while increasing the energy density-determining nickel content to 90%, with excellent stability and output.
According to foreign media reports, the U.S. Department of Energy plans to provide a $2.5 billion loan to Ultium Cells, a joint venture battery company between General Motors and LG New Energy, to finance its construction of a new lithium battery factory. Ultium Cells plans to use the funds for battery plants in Ohio, Tennessee and Michigan. Among them, the Ohio battery plant will start production in August, followed by the Tennessee battery plant will begin production at the end of 2023, and the Michigan battery plant has also been put into production in 2024.
In addition to expanding battery production capacity in the United States, on June 13, LG New Energy also announced that the company will invest more than 730 billion won in the Ochang factory in South Korea to build a new cylindrical battery production line, adding about 13GWh of production capacity. Specifically, LG New Energy will invest 582 billion won to build a new factory in Ochang, South Korea, for the production of 4680 batteries, and the new production line will have a capacity of 9GWh. In addition, LG New Energy will invest an additional 150 billion won to expand the existing 2170 battery production line at the Ochang plant, with an estimated new capacity of 4GWh. Commercial production of these new lines will begin in the second half of the year.
As early as May 26, LG Group released a mid-to-long-term strategic report, planning to invest 106 trillion won in South Korea in the five years before 2026, focusing on future growth areas. According to the plan, LG Group will first invest more than 10 trillion won in batteries and battery materials within five years.
Among them, LG Chem plans to invest 1.7 trillion won in battery materials such as cathode materials, separators, and carbon nanotubes by 2026, with the goal of becoming the world's No. 1 comprehensive battery materials company; The Ochang factory makes additional investments to produce cylindrical batteries. At the same time, it will focus on the development of next-generation batteries such as all-solid-state batteries and lithium-sulfur batteries, and develop new businesses such as the BaaS (Battery asa Service) platform.
According to the previous plan of LG New Energy, the global battery production capacity will be increased to 520GWh in 2025, which will meet the needs of about 7.42 million high-performance electric vehicles. In terms of competitiveness, data released by South Korean research institute SNE Research shows that the global electric vehicle battery market scale will reach 202GWh in the first half of 2022, a year-on-year increase of 76%. Among them, LG New Energy ranked second with 28GWh of installed vehicles.
