The three K-battery makers posted weak first-quarter results. LG Energy Solution posted an operating loss of 207.8 billion won and Samsung SDI recorded an operating loss of 155.6 billion won, while SK On is also expected to post a deficit. Brokerages, however, see the first quarter as a cyclical bottom and analyse that profitability will take hold from the second quarter as ESS sales ramp up and the EV segment recovers at the same time.

LG Energy Solution's first-quarter revenue rose 1.2 percent from the previous quarter to 6.56 trillion won, but it swung to an operating loss of 207.8 billion won. IBK Investment & Securities said revenue exceeded consensus by 693.0 billion won due to a change in the accounting presentation of the Advanced Manufacturing Production Credit (AMPC) and the effect of receiving compensation from North American automakers. On earnings, it said fixed-cost burdens for ESS and weak EV sales to North America and Europe weighed, and North American OEM compensation was also fully recognised as exit costs, leaving operating profit below consensus.

Mirae Asset Securities pointed to slow profitability improvement due to initial operating costs for North American ESS and the reflection of a one-off ESS-related provision of 100.0 billion won. In particular, 95 percent of 189.7 billion won in AMPC in the first quarter came from ESS.

Still, a swing to profit is expected from the second quarter. IBK Investment & Securities forecast second-quarter revenue of 7.34 trillion won and operating profit of 312.0 billion won. It said ESS revenue is expected to rise 50 percent from the previous quarter as new North American ESS sites in Lansing and UC2 enter mass production in the second quarter. It forecast the share of ESS in companywide revenue to expand sharply from 26 percent in the first quarter to 47 percent in the fourth quarter.

Samsung SDI's first-quarter revenue fell 7.3 percent from the previous quarter to 3.58 trillion won, and it posted an operating loss of 155.6 billion won. The decline was driven largely by a 20 percent drop in EV-related revenue from the previous quarter due to a base effect from receiving one-off compensation in the fourth quarter, while revenue rose slightly excluding that, it said. Mirae Asset Securities estimated that the EV division's loss ratio narrowed sharply to around minus 10 percent, and that ESS returned to operating profit even excluding AMPC.

The recovery engine is working on both EV and ESS. From the second quarter, shipments of P6 high-nickel products begin for Ioniq 3 and EV2, volume models for Hyundai and Kia in Europe, bringing EV into a recovery phase. North American ESS has secured orders in full through 2028. Year-end ESS production capacity will be 42 gigawatt-hours (GWh), of which North America accounts for 29 GWh. IBK Investment & Securities forecast AMPC of 359.1 billion won this year from 7.6 GWh and presented a return to profit in the fourth quarter for the first time in nine quarters. Kyobo Securities assessed that, as the backup battery unit (BBU) market grows 70 percent in 2026, upgrading direct supply channels with cloud service providers (CSP) is also a factor for margin improvement.

SK On's slump is the deepest. Its first-quarter global battery market share was 3.7 percent, down 0.8 percentage points from a year earlier, and its ranking fell to seventh from fourth. Cumulative operating losses since its establishment amount to 4.0 trillion won. Its debt ratio climbed again to 251 percent in the first half of this year, and net debt swelled to about 20.0 trillion won as of the end of last year.

◆The common answer for all three is 'ESS and normalization of North American production'

Bad news emerged in a chain from outside. Volkswagen ended production of the ID.4 at its Chattanooga, Tennessee plant and shifted back to internal combustion SUVs. Nissan indefinitely postponed its EV production plan at its Canton, Mississippi plant, making it inevitable to review a 15.0 trillion won battery supply contract signed in March last year for 99.4 GWh. BlueOvalSK, a joint venture with Ford, split its operating method in December last year. SK On became the sole operator of the Tennessee plant, and 1,512 people were laid off in the process. In March, SK Battery America cut 958 jobs, equivalent to 37 percent of the workforce at its Georgia plant.

In the end, SK On's path forward is also ESS. SK On will begin mass production of lithium iron phosphate (LFP) batteries for ESS from October at SK Battery America's Georgia Plant 2. Plant 1 is currently stopped, and the company says it can resume operations immediately depending on future orders. It will invest 58.7 billion won in its Seosan plant in South Korea to build a separate ESS LFP line with annual capacity of 3 GWh.

SK On CEO Yongwook Lee (이용욱) has set an ESS order target of at least 20 GWh this year. Supply talks for more than 10 GWh are under way with Flatiron and others. iM Securities saw a high likelihood of concluding 6.2 GWh of preferred-bidder volume, citing rising U.S. solar installations and expanding demand for on-site power generation for AI data centres (AIDC). In Europe, EV sales equipped with SK On batteries rose 29 percent year on year in March, bringing its Komarom Plant 2 in Hungary to near full operation.

Common variables for all three companies are the speed at which sales from new ESS lines are reflected and the timing of normalization at North American production bases. Brokerages forecast ESS demand estimates will be revised higher as flexibility in country-by-country energy self-sufficiency policies expands. Risks that could delay a return to profit include a 25 percent U.S. auto tariff, automakers returning to hybrids and internal combustion vehicles after subsidy abolition, and China's CATL expanding market share.