South Korea’s LG Chem Ltd posted a 20% fall in quarterly profit on Monday, hurt by a one-off expense associated with the recall of General Motors‘ Bolt electric vehicles.
It reported an operating profit of 727 billion won ($617.55 million) for the July-September period, versus 904 billion won a year earlier and an average analyst forecast of 893 billion won compiled by Refinitiv SmartEstimate.
Earlier this month, LG Chem, which owns electric battery maker LG Energy Solution (LGES), said it would take a charge 620 billion won in its third quarter results in connection with the GM Bolt recall due to the risk of fire caused by rare battery defects.
Revenue rose 41% to 10.6 trillion won, LG Chem said in a regulatory filing.
LG and GM settled a $2 billion cost deal on the Bolt recall earlier this month, paving the way for LG’s battery unit to resume work on its suspended initial public offering.
“We expect that it is less likely that the company would face repetitive large-scale recalls related to battery safety issues in the future,” LGES Vice President Chang Seung-se said in a call with analysts, citing the company’s improved process to detect defective batteries.
LGES is hoping to a ride a boom in soaring battery demand, as global automakers are investing billions of dollars to accelerate a transition to low-emission mobility and prepare for a progressive phase-out of internal combustion engines.
The company, which also supplies Tesla Inc and Hyundai Motor Co, struck a deal last week with Stellantis NV to jointly produce EV batteries.
Before the third -quarter earnings results announcement, LGES named LG Corp Vice Chairman Kwon Young Soo as its new chief executive officer.
Asked about LG Chem’s plans to develop cheaper lithium-iron-phosphate (LFP) nL4N2PU1IWbatteries for electric vehicles, the company said it plans to supply LFP batteries for energy storage systems (ESS) first.
Tesla said it plans to adopt LFP batteries in its fleet of standard-range vehicles globally. LGES has been focusing on developing nickel-cobalt-manganese (NCM) batteries, which are more expensive but offer longer range.
Japan’s Panasonic said on Monday it had no nL1N2RL0CKplans to make LFP batteries for electric vehicles. Shares of LG Chem closed up 0.4%, versus the KOSPI’s 0.5% rise.
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LG Chem, whose wholly owned battery unit LG Energy Solution (LGES) supplies batteries to GM, said it had accounted for recall-related costs of about 620 billion won ($517.23 million) in its earnings results for the July-September period.
“According to the recent recall agreement between LG and GM, LG has set 1.4 trillion won as the compensation based on the total replacement of old models and partial replacement of new models.”