An employee walks past the logo of LG Energy Solution at its office building in Seoul, South Korea, November 23, 2021. REUTERS/Kim Hong-Ji/File Photo
SEOUL (Reuters) -South Korea's LG Energy Solution said on Wednesday quarterly profit more than doubled, as the battery maker factored in subsidies from the U.S. Inflation Reduction Act and solid sales of electric vehicles in U.S. and European markets.
The company, which supplies Tesla Inc, General Motors Co and others, said revenue going forward could be affected by lower metals prices as it had signed contracts with customers on "cost pass-through" terms to better manage materials costs.
Changes in metal costs would likely show in the second half of the year, but the impact on profitability would be limited, the company added.
LG Energy Solution reported an operating profit of 633 billion won ($472.6 million) for the January-March period, up 145% from 259 billion won a year earlier.
That was in line with an average analyst forecast of 633 billion won compiled by Refinitiv SmartEstimate.
South Korea is home to three of the world's five biggest electric vehicle (EV) battery makers - LG Energy Solution, Samsung SDI Co Ltd and SK On, which control more than a quarter of the global EV battery market.
LG Energy Solution's revenue for the quarter rose 101% to 8.7 trillion won, LG Energy said in a regulatory filing. Revenue for second-quarter sales would likely stand at similar levels, despite any impact from metal prices, it said.
Analysts attributed the jump in profit to the solid sales of EVs in the United States, where EV consumers could receive up to $7,500 U.S. EV tax credit under the Inflation Reduction Act, which would help boost sales of EVs.
The U.S. Inflation Reduction Act requires 50% of the value of battery components to be produced or assembled in North America to qualify for a $3,750 credit and 40% of the value of critical minerals sourced from the United States or a free trade partner also for a $3,750 credit.
About 80% of EVs that are eligible for U.S. federal tax credits use batteries from South Korea's three major cell makers - LGES, Samsung SDI Co Ltd and SK On, according to an analysis from brokerage Korea Investment & Securities.
Shares of LG Energy Solution (LGES), carved out of LG Chem Ltd in a market debut last year, rose nearly 2% in morning trade, outpacing a flat broader KOSPI market.
Analysts expect that aggressive vehicle price cuts by LG's major customer Tesla would likely ignite demand for EVs this year, helping LGES increase battery shipments.
($1 = 1,339.3700 won)
(Reporting by Heekyong Yang and Hyunsu Yim; Editing by Anne Marie Roantree and Stephen Coates)
