Samsung SDI headquarters in Yongin, Gyeonggi Province, South Korea (Courtesy of Samsung)
Samsung SDI Co., the world’s sixth-largest electric vehicle battery maker, saw its second-quarter operating profit plunge from a year-earlier period due to sluggish EV sales of its European clients, such as BMW, Volkswagen and Audi, and low demand for cylindrical batteries.
On Tuesday, the battery unit of Samsung Group posted 280.2 billion won ($202.4 million) in operating profit and 4.45 trillion won in revenue for the April-June period. The quarterly sales and profit dropped 24% and 38% from a year ago, respectively.
“The global demand for our products, particularly batteries, slowed down significantly more than initial forecast during the first half of this year and failed to meet market expectations. The global demand may continue to fall short of projection in the second half and the recovery momentum could be later than anticipated,” Samsung SDI’s Executive Vice President Kim Jong Sung said during the earnings conference call on Tuesday.
“We believe the falling demand is short-term impact by chasm (or slower-than-expected uptake of a product), inventory adjustments and uncertainties in macro environment, and our mid-to-long-term growth will remain unchanged,” Kim added.
(Graphics by Dongbeom Yun)
NO MAJOR CHANGE IN INVESTMENT
Market insiders said sluggish EV sales of Samsung SDI’s European clients, such as BMW, Volkswagen and Audi, and the decline in sales of cylindrical batteries for electric cars and electronic devices have impacted the Korean battery maker’s earnings.
The sales and operating profit of batteries for energy storage systems (ESS) rose in the second quarter from a year-earlier period, thanks to the growing demand for data centers. Samsung SDI is slated to supply batteries for ESS to US clean energy company NextEra Energy Inc. in a 1 trillion won deal.
“We don’t have a major change in investment plans, including capital injection in Hungary-based battery facilities expansion and the construction of the first US EV battery plant of Samsung SDI-Stellantis N.V. joint venture for secured orders, as well as all-solid-state and 46-phi batteries for our mid-to-long-term growth,” said Samsung SDI’s business management office finance team head Kim Yoon-tae.
The company made a new investment of 3 trillion won during the first half year, more than double what it did a year ago, he added.
Samsung SDI’s cylindrical batteries (Courtesy of Samsung)
EARLY PRODUCTION
The first joint plant between Samsung SDI and Stellantis will start operation in the fourth quarter of this year, earlier than initially scheduled for the first quarter of 2025, as the companies expect EV battery demand to gradually recover from later this year.
Samsung SDI has also moved up mass production of 46-phi cylindrical batteries by a year to early next year. The battery cells are called a “game changer” as they have greater power and lower production cost compared with the 2170 type of cylindrical batteries.
The company will supply the batteries to micromobility such as electric scooters for commercial viability assessment and launch the battery cells for EVs.
Samsung SDI’s battery plant in Göd, Hungary (Courtesy of Samsung)
OUTPERFORMANCE
Despite the decline in second-quarter earnings, Samsung SDI posted better performance than its crosstown rivals LG Energy Solution Ltd. and SK On Co.
The world’s third-largest battery maker LG Energy logged a 195.3 billion won operating profit for the second quarter. But the earnings could be seen as 252.5 billion won in loss if it excludes the Advanced Energy Project Credit (AMPC), a subsidy of the US Inflation Reduction Act (IRA).
SK On, global No. 4 EV battery producer, is estimated to have more than 400 billion won in operating loss for the second quarter.
Samsung SDI has been more cautious in investments compared with the peers since the battery market started expanding two years ago. The investment strategy focused on profitability shines with less burden for fixed costs, market insiders said.
By Hyung-Kyu Kim
khk@hankyung.com
Jihyun Kim edited this article.
