K-Battery Big Three: Q3 Earnings Recovery in Sight... ESS at the Center of Rebound [Battery Radar]

Real-time news

The three major Korean battery companies are showing signs of a performance recovery in Q3, with ESS at the center of the turnaround [Battery Radar]

LG Energy Solution and Samsung SDI expand profits, while SK On narrows losses… North American ESS orders and production ramp up

[Digital Daily, by Goh Seong-hyeon] South Korea’s top three battery makers reported improved results in their third-quarter earnings releases. Revenue from energy storage systems (ESS) grew as demand expanded in the North American ESS market, while the recovery of the European electric vehicle (EV) market also contributed to the performance improvement. SK On, which entered the ESS business relatively late, also narrowed its year-on-year losses, signaling a push to restore profitability.

According to industry sources on the 4th, LG Energy Solution recorded Q3 revenue of 9.6434 trillion won and operating profit of 756 billion won. Revenue rose 59% year-on-year and 27.6% quarter-on-quarter. Operating profit increased 25.7% year-on-year and 567.3% quarter-on-quarter. Excluding the U.S. Advanced Manufacturing Production Tax Credit (AMPC) of 416.9 billion won, operating profit was 339.1 billion won.

The performance improvement was driven by increased ESS shipments in North America and higher sales of pouch and cylindrical batteries for EVs. In particular, ESS shipments rose by more than 60% compared to the previous quarter, pushing the share of ESS-related revenue to the low 30% range. Utilization rates at the Holland, Michigan plant and new ESS production bases increased, and cost savings from productivity improvements were also realized.

The recovery in European EV sales also had an impact. As major automakers increased EV production, utilization rates at the Poland plant improved, and cylindrical battery sales expanded. LG Energy Solution projected that Q4 ESS shipments would rise by approximately 40% compared to the previous quarter, and total company revenue would grow by around 10%. However, profitability is expected to decline slightly due to initial fixed costs associated with new production lines.

Samsung SDI maintained its profitable trajectory in Q3, following Q2. Samsung SDI’s Q3 revenue was 4.6856 trillion won, and operating profit was 407.8 billion won. Revenue increased 52.6% year-on-year and 20.9% quarter-on-quarter. Operating profit turned from a loss in the same period last year to a profit, and increased by approximately two-fold compared to the previous quarter. This is the highest operating profit since Q3 2023.

The main driver was increased sales of U.S. ESS and battery backup units (BBU) for artificial intelligence (AI) data centers. ESS battery supply from the Ulsan plant to Star Plus Energy (SPE) in the U.S. expanded, and increased sales of cylindrical batteries for power tools and EVs also contributed to the results. Additionally, the inclusion of customer compensation payments resulted in an operating profit of 361.9 billion won in the battery segment alone.

Samsung SDI’s fourth-quarter performance is also expected to be positive. The company began mass production of high-capacity prismatic lithium iron phosphate (LFP) batteries at its SPE facility last month and is expanding supply of nickel-cobalt-aluminum (NCA)-based energy storage system (ESS) batteries that came online last year. Increased benefits from Advanced Manufacturing Production Credit (AMPC) incentives due to local production in the United States, along with expanded supply of uninterruptible power supply (UPS) batteries for data centers, are also expected to contribute to improved profitability.

SK On narrowed its loss compared to the same period last year, despite the continued slowdown in electric vehicle (EV) batteries. The company’s third-quarter revenue was 1.5263 trillion won, with an operating loss of 80.5 billion won. Although it swung to a loss from an operating profit of 821.8 billion won in the previous quarter, the loss narrowed by 44.3 billion won compared to the 124.8 billion won operating loss in the same period last year.

Overall performance deteriorated as one-time gains, such as a large compensation payment from Ford in the previous quarter, disappeared and EV battery sales declined. However, the company continued to improve profitability excluding one-time factors, driven by company-wide cost reductions and enhanced operational efficiency at production facilities. SK On plans to improve its financial results in the fourth quarter by leveraging a recovery in EV sales among key customers and further cost reductions.

The company is also preparing for a turnaround in its ESS business by securing new orders. In August, SK On signed a supply contract with NeoVolta in the United States for approximately 9 gigawatt-hours (GWh) of LFP pouch batteries for ESS applications. It also signed LFP cathode material supply contracts with domestic material suppliers such as L&F and POSCO Future M, expanding its non-China supply chain. Additional orders with customers in North America and South Korea are also under discussion.

To this end, the company is working to convert existing EV battery production lines in South Korea and North America for ESS use. The strategy aims to reduce investment burden and increase utilization rates by leveraging existing facilities rather than building new capacity. With supply under the NeoVolta contract set to begin next year, the contribution of the ESS business to overall performance is expected to grow gradually.

Industry observers expect the trend of performance recovery among South Korea’s top three battery makers to continue into next year. In North America, ESS demand is expanding due to increased investment in AI data centers and grid expansion. As the United States strengthens its Non-Prohibited Foreign Entity (Non-PFE) regulations, efforts to replace Chinese-made batteries are increasing, creating greater order opportunities for domestic battery companies.

LG Energy Solution has secured an order backlog of 160 GWh for energy storage systems (ESS) as of the end of the third quarter. In North America, the majority of its supply volume through 2028 has already been finalized, and the company plans to expand its ESS production capacity to over 70 GWh by the end of next year. Samsung SDI has also secured orders exceeding 60 GWh in the U.S. utility-scale ESS market through October of this year. Following the securing of supply volumes through 2029 for its partnership with a U.S. SPE and its Ulsan plant, the company is also preparing for mass production at its additional production site, Synergy Cells, by early 2029.

SK On is also moving to secure additional customers in line with the expansion of the North American ESS market. In particular, there is a growing trend of increased supply inquiries, primarily from U.S. ESS operators and system integrators that previously used Chinese-made batteries. However, given that its mass production and supply expansion have lagged behind those of LG Energy Solution and Samsung SDI, the challenge of converting its secured order volumes into actual revenue is seen as a key task for the future.

The recovery of the European electric vehicle (EV) market is also a factor to watch. Battery demand is increasing due to purchase support policies in major countries and the rising sales of affordable EVs. Moreover, efforts to strengthen local production and supply chains under the Industrial Acceleration Act (IAA) are expected to present opportunities for domestic companies. LG Energy Solution, Samsung SDI, and SK On, all of which have already established local production facilities, are pushing for additional orders and expanded supply from their automotive customers.

An industry official stated, "The results of line conversions for ESS battery production are gradually becoming apparent, and with major power grid investments, such as those for AI infrastructure, expected to continue for the time being, ESS is emerging as a key pillar of performance growth." The official added, "Given the mixed outlook on localization demand in the European EV market, rapidly securing this demand will be a critical task for sustaining an upward trend in performance."