Ecopro Co (086520) Q2 2024 earnings summary

Executive summary

• Q2 2024 consolidated revenue declined 15% quarter-over-quarter to KRW 864.1 billion, with an operating loss of KRW 54.6 billion, mainly due to lower battery material ASPs and subdued downstream demand.

• Revenue declined 57% year-over-year, and EBIT turned negative, driven by higher material costs in lithium and recycling businesses.

• Affiliates reported mixed results: Ecopro BM saw a 17% revenue drop, Ecopro Materials revenue fell 16%, and Ecopro HN revenue decreased 9% quarter-over-quarter.

• Inventory levels and valuation reserves were actively managed, with significant reversals expected to support profitability in the second half.

• Expansion of lithium sales to new customers and a long-term supply agreement with Samsung SDI were announced.

Financial highlights

• Ecopro BM Q2 revenue: KRW 809.5 billion (down 17% Q/Q); operating profit: KRW 3.9 billion.

• Ecopro Materials Q2 revenue: KRW 66.7 billion (down 16% Q/Q); operating loss: KRW 3.7 billion.

• Ecopro HN Q2 revenue: KRW 46.8 billion (down 9% Q/Q); operating profit: KRW 3.6 billion; OP margin: 7.7%.

• Holding company Q2 revenue: KRW 864.1 billion (down 15% Q/Q); operating loss: KRW 54.6 billion.

• Equity method gain from global resources investment: KRW 4.9 billion in Q2.

Outlook and guidance

• Metal price volatility expected to decrease in H2, with potential gradual price increases.

• Profitability in lithium and recycling businesses anticipated to improve due to diversified sourcing and new customer acquisition.

• EV cathode sales may rebound after OEM inventory is exhausted by year-end; ESS and power tool cathode sales expected to drive growth.

• European and North American investments to continue, but overall capacity expansion may be moderated depending on market conditions.

• Ongoing global expansion of cathode and precursor production capacity, with new plants in Hungary and Canada.