LGES and Posco reduce battery investments
This was stated by both companies when announcing their financial results for the first quarter. “We will continue investments that are necessary to cope with long-term demand and to secure production capacity in North America, but our overall facility investments will go down to some degree,” said LGES CFO Lee Chang-sil, according to the Korea Times.
Posco strategy chief Jeong Ki-seop explained: “Considering the slow growth in the EV market, we will delay investments in some businesses and focus on lucrative businesses. For example, some of our planned investments in recycling plants abroad will be delayed, considering the sluggish supply of EVs and waste batteries.”
These statements by the two managers originate from the respective investor calls following the publication of the quarterly reports. These statements are not included in the reports and associated press releases themselves. Only LGES makes the somewhat cloaked statement that it will “proactively improve its investment and cost efficiency”. The scope of investments and the speed of execution will be adjusted “according to priority” and the production capacity of the individual plants will be optimized. LGES sees further potential in logistics and supply costs.
It is not known in either case exactly how much the companies want to save or which investment projects are affected. The period in which the measures are to take effect has also not yet been defined in more detail. However, LGES CFO Lee says that he expects it will “take some time” for demand in the European market to recover.
LG Energy Solution was spun off from LG Chem as a battery manufacturer in 2020. As the Korea Times writes, this is the first time the company has cut capital expenditure in its four-year existence – previously the budget had always been increased. Most recently, it was announced in January that investments in 2024 would exceed 10 trillion won, or the equivalent of around 6.8 billion euros.
LGES posted a profit of 157.3 billion won in the first quarter, which is around 106 million euros. However, as the company received a loan of 127.8 million euros from the US government under the Inflation Reduction Act, the report would have shown a quarterly loss without this loan.
Posco, which is actually a steel company that has broadened its portfolio in recent years with a number of investments in eMobility materials, also made a profit in the first quarter with its battery materials division. However, as there was a loss in the fourth quarter due to growing inventories, the company has become more cautious about further investments in the division.
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