Lotte Energy Materials (A020150) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue declined due to sluggish EV sales in Europe and customer inventory adjustments, resulting in lower sales volumes.

• Operating profit turned negative, impacted by increased fixed costs, reduced production rates, adverse FX effects, and inventory write-offs.

• Revenue for the first nine months of 2024 was ₩715.9 billion, down 11.5% year-over-year, with operating loss of ₩24.4 billion and net income of ₩14.0 billion, a turnaround from a net loss in the prior year.

• The company’s main business is divided into materials (Elecfoil for batteries and PCBs) and construction (curtain wall, glass, and window installation), with Elecfoil exports as the primary revenue driver.

• Major investments are ongoing in Malaysia and Spain to expand Elecfoil production capacity, targeting growth in the global EV and ESS battery markets.

Financial highlights

• Q3 2024 revenue was KRW 211 bn, down 1.4% year-over-year and 19.5% quarter-over-quarter.

• Operating profit was a loss of KRW 31.7 bn, compared to a profit of KRW 3 bn in Q3 2023 and Q2 2024.

• Net profit remained positive at KRW 7 bn, flat year-over-year and quarter-over-quarter.

• Consolidated revenue for 2024 Q3 YTD: ₩715.9 billion (2023: ₩809.0 billion).

• Cash and equivalents at period end: ₩447.5 billion.

Outlook and guidance

• Mass production for key North American customers' JV plants to begin in Q4 2024, with sales escalation expected.

• Direct supplies to North American OEMs to start in 1H 2025, with sales in North America projected to rise over 50% year-over-year in 2025.

• European market recovery expected post-Q4 2024 as EV subsidies resume and new models launch in 2025.

• Management targets double-digit revenue growth for 2024, driven by capacity expansions and global battery market demand.

• Malaysia and Spain plants are expected to add significant Elecfoil capacity by 2028 and 2027, respectively.