Ecopro Co (086520) Q3 2024 earnings summary

Executive summary

• Q3 2024 saw significant revenue declines and operating losses across major business units, primarily due to weak EV and battery materials demand, falling metal prices, and adverse currency movements.

• Inventory valuation losses were a major drag on profitability, with expectations for further provisioning in Q4 if metal prices remain low.

• Inventory rationalization and cost control measures were implemented, with management anticipating gradual recovery in 2025, supported by new customer acquisitions, regulatory tailwinds, and capacity expansions.

• Ongoing investments in global resource projects and capacity expansion continued, despite short-term financial pressures.

• Operates as a holding company with two main business pillars: battery materials (cathode, precursor, lithium, recycling) and environmental solutions (air pollution, greenhouse gas, water treatment).

Financial highlights

• Q3 2024 consolidated revenue fell 31% Q/Q to KRW 594.3B, with an operating loss of KRW 108.8B and KRW 34.4B inventory loss; 9M 2024 revenue was ₩2,478.96B with a net loss of -₩209.64B.

• EcoPro BM Q3 revenue fell 36% Q/Q to KRW 521.9B, with an operating loss of KRW 41.2B and KRW 18.8B inventory loss.

• EcoPro Materials Q3 revenue down 1.2% Q/Q to KRW 65.9B, operating loss of KRW 38.5B, impacted by KRW 15.2B inventory loss.

• EcoPro HN Q3 revenue up 20% Q/Q to KRW 56.1B, operating profit up 58% Q/Q to KRW 5.7B, OP margin at 10%.

• Parent company 9M 2024 net profit: ₩5.79B, down sharply from FY2023 net profit of ₩211.87B.

Outlook and guidance

• Q4 expected to remain challenging for cathodes and battery materials due to ongoing inventory adjustments and weak demand, with recovery in sales and profitability anticipated in 2025 as EV inventory normalizes and new regulations boost non-Chinese precursor demand.

• EcoPro Materials expects higher precursor sales and improved profitability as utilization rises and metal price volatility eases.

• EcoPro HN projects stable revenue growth in Q4 and full-fledged recognition of new business lines in 2025.

• Ongoing expansion of battery materials production in North America and Europe to address IRA/CRMA risks and global demand.

• Additional inventory valuation provisions anticipated for lithium and recycling businesses by year-end.