By Heekyong Yang and Jihoon Lee
SEOUL (Reuters) -South Korea’s LG Energy Solution Ltd missed expectations for quarterly profit on Thursday as the battery maker booked a one-off cost for General Motors’ recall of its Bolt electric vehicle, sending its shares down nearly 7%.
The company, which supplies General Motors Co, Tesla Inc and others, warned it faces weaker EV demand in Europe and China than previously expected.
“We expect the market environment in the second half of this year will not be easy,” said LGES Chief Financial Officer Lee Chang-sil, adding that EV sales in Europe, especially, had been sluggish due to economic headwinds such as high inflation.
The U.S. is the only market where demand forecasts have not been cut, the company said.
LGES reported an operating profit of 461 billion won ($363 million) for the April-June period, up from 196 billion won a year earlier, but that was far below the company’s estimate of 612 billion won and an average analyst forecast of 641 billion won compiled by Refinitiv SmartEstimate.
The miss was driven by a one-off cost of 151 billion won which LGES said reflected higher costs of materials to meet GM’s Bolt EV recall, which involved replacing battery packs and modules due to fire risks with earlier models.
“There is no change in the scope of the recall. And, from the current point of view, the chances of a further rise in recall costs appear to be quite low,” LGES Vice President Jang Seungkwon said during an earnings conference call.
LGES shares were trading down 6.4% after falling as much as 6.6% in morning trade, versus a 0.7% rise in the benchmark KOSPI at 0240 GMT.
“LGES’ comment on sluggish EV demand in Europe, where it has major customers like Volkswagen and Renault, seems to be affecting the company’s share price,” said Kang Dong-jin, an analyst at Hyundai Motor Securities.
Revenue for the quarter rose 73% to 8.8 trillion won, LG Energy said in a regulatory filing.
($1 = 1,271.1000 won)
(Reporting by Heekyong Yang and Jihoon Lee; Additional reporting by Hyunsu Yim; Editing by Shri Navaratnam and Sonali Paul)
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