LG Energy Solution raises annual sales target to 40% growth on ESS boom

Record Q3 earnings, ESS at 30% of sales

North America ESS capacity to top 70GWh next year

Q4 sales to rise 10%, but margins to narrow

LG Energy Solution's factory in Holland, Michigan [LG Energy Solution]

LG Energy Solution has raised its annual sales target to as much as 40% growth over last year, driven by strong ESS demand. The company said orders for its North American ESS production capacity are largely booked through 2028, and it expects the ESS-led growth momentum to continue.

LG Energy Solution announced Tuesday that it had revised its full-year sales guidance upward — from a previous target of mid-to-high teens to 20% growth over last year, to a new target of 35 to 40% growth including North American production subsidies. Applied against last year's sales of 25.32 trillion won ($18.9 billion), the revised target implies full-year sales of roughly 34.2 trillion to 35.4 trillion won.

The company kept its other targets unchanged: an operating profit margin in the mid-single digits including subsidies, and a capital expenditure reduction of more than 40% from last year.

LG Energy Solution said at its third-quarter earnings conference call Tuesday that it posted record quarterly earnings. Third-quarter sales reached 9.64 trillion won and operating profit came in at 756 billion won, up 59% and 25.7%, respectively, from the same period a year earlier. With ESS accounting for just over 30% of sales, the company said it plans to sustain its growth trajectory through large-scale order wins.

ESS backlog at 160GWh; Nvidia partner status, direct big-tech supply deals secured

Jung Jae-wook, executive director of ESS battery planning and management at LG Energy Solution, said demand for locally produced cells in North America is surging. "The North American ESS market is seeing rapid demand growth, and policy factors favorable to non-prohibited foreign entity companies are driving a sharp increase in customer needs for locally manufactured cells," Jung said. "Based on our currently planned capacity, orders through 2028 are largely confirmed."

Jung added that anticipated demand already exceeds available supply capacity. "We plan to manage remaining future capacity efficiently, focusing on strategically high-priority tasks," he said.

The company's ESS order backlog stood at 160GWh at the end of the third quarter. Chief Financial Officer Executive Vice President Lee Chang-sil said LG Energy Solution had for the first time signed a direct supply contract for battery energy storage systems with a big-tech company, strengthening its position in the AI data center market. "We are currently in discussions with multiple utility companies and hyperscalers on new project supply, and we expect additional order momentum to continue into the fourth quarter," Lee said. The company also noted that it was selected in September as the only Korean battery maker to become an Nvidia "DSX Ready BESS Partner."

LG Energy Solution also plans to expand production capacity. Building on a target of more than 50GWh of North American ESS capacity by year-end, the company said it will add pouch-line conversions and a new prismatic line at its Lansing, Michigan factory to reach more than 70GWh by end-2027. On a US executive order issued in August that tightened supply chain security requirements for grid equipment including battery energy storage systems and inverters, Lee said the move would further highlight the competitiveness of non-prohibited foreign entity companies like LG Energy Solution that have local production capacity.

All divisions to grow next year; major new 46-series orders in the pipeline

LG Energy Solution's grid-scale ESS battery container product [LG Energy Solution]

Lee said fourth-quarter ESS shipments are expected to rise about 40% from the third quarter to meet North American demand, with overall company sales growing roughly 10%. However, Lee cautioned that profitability would face some pressure, as one-time customer volume compensation payments recognized in the third quarter will not recur and the Honda joint venture's additional ESS production capacity will bring initial fixed costs. "A partial slowdown in fourth-quarter profitability appears unavoidable," Lee said.

For next year, the company projected sales growth across all business divisions, driven by order-backed ESS volume growth, new sales of the 46-series battery, and North American electric vehicle production.

LG Energy Solution also signaled further expansion of orders for its next-generation 46-series cylindrical battery. Noh In-hak, executive director of small battery planning and management, said the company is in active discussions with multiple global automakers beyond the more than 440GWh already secured from existing original equipment manufacturers and electric vehicle startups. "We expect to announce meaningful order results in the near future," Noh said.

The company's Arizona factory — its first North American cylindrical battery production site — is preparing to begin 46-series line operations by year-end, and North American cylindrical capacity is set to grow from 10GWh this year to more than 20GWh by 2027. Its Poland factory will also begin producing the 46-series from 2029. Next-generation product development and production preparations will continue at the Ochang Energy Plant in South Korea.

In Europe, LG Energy Solution said tightened localization requirements under a revised recommendation of the Industrial Acceleration Act are expected to boost demand for non-Chinese manufacturers with local production capabilities. Ahn Min-gyu, executive director of automotive battery planning and management, said depreciation costs at the company's Polish subsidiary are declining meaningfully, giving LG Energy Solution a price advantage over rivals.

Lee said LG Energy Solution will actively respond to market changes while sharpening its strategy of selectivity and focus. "We plan to maximize operational efficiency with limited resources," Lee said.

eyre@heraldcorp.com