[DigitalToday reporter Suk Dae-geon (석대건)] Operating profit at South Korea's three battery makers is expected to beat market forecasts in the third quarter. Higher shipments of energy storage systems (ESS) in North America are increasing production subsidies under AMPC, while one-off income such as customer compensation is also adding to results. The pace of earnings recovery is expected to vary among the three battery cell makers because they are starting up North American ESS lines at different times.

On Oct. 8, the industry expects third-quarter operating profit at Korean battery cell makers to rise from the previous quarter despite weak European electric vehicle (EV) battery shipments and a lower exchange rate. Hana Securities 분석 said the AMPC effect from customer compensation and higher North American ESS shipments is larger than expected. AMPC is a subsidy that increases as more products are made in the United States.

Demand for ESS in North America is also rising. According to research firm SNE Research, North American ESS battery shipments in the first half of this year rose about 83 percent from a year earlier to 76 GWh. That is faster than LG Energy Solution's projection early this year for North American ESS demand growth.

LG Energy Solution's third-quarter operating profit is expected to beat market forecasts, helped by higher AMPC. Mirae Asset Securities forecast 403.7 billion won, well above the market estimate of 290.0 billion won. It raised its operating profit estimate, saying performance improvement across all divisions will pick up from the third quarter.

The EV division is expected to narrow losses as it starts new projects for Europe, including Volkswagen, and restarts the Ultium Cells line. Mirae Asset Securities 전망 said the small-battery division will maintain a high utilisation rate on strong sales of new Tesla models.

Operating profit in the past two quarters fell short of market forecasts due to initial ramp-up costs for the North American ESS line. In the third quarter, shipments of ESS volume deferred from the second quarter are set to pick up, and the stabilisation of U.S. ESS production line operations is taking effect.

Third-quarter ESS revenue of 3.057 trillion won alone is expected to exceed revenue from the small-battery division. As the Ultium Cells joint venture with GM restarts its line, AMPC recognition will also resume, lifting total AMPC to 466.0 billion won. Operating profit at the ESS division excluding AMPC is still estimated to be in the red in the third quarter.

Samsung SDI is also expected to beat market forecasts for a third straight quarter. Mirae Asset Securities said Samsung SDI's third-quarter operating profit is expected at 302.3 billion won, above the market consensus of 107.0 billion won. The impact reflects one-off income received from major North American customers that is also being booked in the third quarter.

Excluding one-off items, the core business is estimated to return to operating profit as domestic ESS shipments delayed in the second quarter increase, and shipments of battery backup units (BBU) and cylindrical batteries for power tools rise, boosting the small-battery division. ESS is also expected to account for a larger share of company-wide revenue than in the second quarter. Samsung SDI's North American ESS line will start operations in the fourth quarter.

SK On's third-quarter operating profit is expected to fall from the previous quarter. It turned profitable in the second quarter after receiving about 1.1 trillion won in tariff refunds and customer compensation. That one-off profit disappears in the third quarter. Given that it is in the stage of securing orders in the North American ESS market, growth potential remains high even if there is a time lag.

SK On said it signed a supply contract in August with U.S. ESS company NeoVolta for 9 GWh of lithium iron phosphate (LFP)-based ESS. The volume will be produced at a plant in Georgia and supplied over five years starting in 2027. In the United States, demand for ESS is rising as artificial intelligence data centre (AIDC) power plants are built, while tighter exclusion of Chinese products has made supplies of non-Chinese ESS scarce. IM Securities said the contract filled about half of this year's ESS order guidance.

Ultimately, the pace of earnings recovery depends on how quickly North American ESS lines ramp up. Higher utilisation lifts revenue, reduces fixed-cost burdens and increases AMPC. LG Energy Solution is currently increasing shipments as operations at its North American ESS line stabilise. Samsung SDI will start operating its North American ESS line in the fourth quarter, while SK On's NeoVolta volume will be supplied from 2027.