2023-10-15 15:03:00
Just a month ago, secondary battery material company Ecopro and its subsidiaries, which were known as ’emperor stocks’ with earnings exceeding 1 million won per share, recorded an ‘earnings shock’ that fell far below market expectations. This report card contrasts with LG Energy Solutions’ record-high operating profit.
According to securities firms on the 15th, EcoPro recorded provisional sales of 1.9045 trillion won and operating profit of 65.7 billion won in the third quarter of this year. Sales increased by 16.7% compared to the same period last year, but operating profit plummeted by 68.9% during the same period. Ecopro BM (operating profit of KRW 45.9 billion), the world’s No. 1 cathode material company, and Ecopro HN (operating profit of KRW 11.5 billion), which conducts environmental business, also fell short of market expectations.
The industry believes that this is due to the supply structure of cathode material companies. This means that in the product supply structure that goes from ‘material → cell → finished vehicle’, ‘material’ companies at the front end bear the brunt of the ups and downs in raw material prices. The price of lithium hydroxide, the main raw material for cathode materials, fell by half in one year from regarding $70,000 (regarding 95 million won) per ton in the third quarter of last year to regarding $32,000 (regarding 43 million won) per ton in the third quarter of this year. When mineral prices rise, products made with lithium purchased at high prices have no choice but to be sold cheaply, which reduces profitability.
On the other hand, the position of battery cell companies, which are major customers of cathode materials companies, is slightly different. For cathode materials contracted in large quantities, prices are adjusted every 3 to 6 months. This means that even if raw material prices fall, there will be no significant change in margins in the short term.
However, the battery industry is also clearly feeling tense. The reason mineral prices have fallen is due to the slowing growth rate of electric vehicle sales in major countries such as China and Europe. According to FnGuide, a financial information company, Samsung SDI’s operating profit consensus (performance forecast) for the third quarter is 515.7 billion won. This is a slight increase from the 450.2 billion won recorded in the previous quarter, but it is below the original forecast of 520 billion won. SK On is expected to have an operating loss of 157.6 billion won in the third quarter.
LG Energy Solutions (LG Ensol) achieved its highest ever quarterly operating profit in the third quarter, recording KRW 8.2235 trillion in sales and KRW 731.2 billion in operating profit (provisional). Regarding this, the securities industry analyzed that ‘the joys and sorrows of each company were different depending on the portfolio structure.’ LG Ensol has secured all of the top five global automakers, including Toyota, Volkswagen, Hyundai Motors, and Kia, as customers. Samsung SDI is dominating the high-end market, such as BMW, which is relatively free in price. However, it is known that SK On suffered from sluggish demand from its major customers, Ford and Volkswagen, and its European and North American factories were unable to produce normal yields until the second quarter.
China’s growth is dizzying. CATL, the world’s No. 1 company, had sales in the first half of the year of 189.246 billion yuan (approximately KRW 33.84 trillion), which is similar to the combined sales of three domestic companies including LG Ensol, Samsung SDI, and SK On (KRW 35.7174 trillion). The operating profit margin is 13.4%, which surpasses the three domestic companies (LG Ensol 5.2%, Samsung SDI 7.7%, SK On -3.6%). The industry interprets this as the result of vertical integration of battery materials in China and government support such as low electricity rates. However, the formation of a trend toward China in the European market is good news for K-battery companies.
Sumin Kim ([email protected])
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