Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Samsung SDI Co Ltd (FRA:XSDG, Financial) has solidified its foundation for medium to long-term growth by finalizing a joint venture contract with GM and winning new orders from major OEMs in Europe and Asia.
- The electronic materials segment showed significant improvement with a 24% quarterly increase in revenue, driven by OLED materials, and a 102% increase in operating profit.
- The company received the highest ESG rating of A+ by KCGS, reflecting its strong commitment to environmental and social governance.
- Samsung SDI Co Ltd (FRA:XSDG) is expanding its ESS business, with increased utility sales in the US and plans to drive earnings growth by expanding EU sales.
- The company is preparing for the mass production of the 46 pipe battery early next year, with significant demand growth expected in the coming years.
Negative Points
- Q3 revenue decreased by 4% quarter-over-quarter and 30% year-over-year, with operating profit declining 46% QoQ and 72% YoY.
- The battery business faced a 31% YoY revenue decline due to slowing market demand for small batteries and a base effect from one-off profit in the previous quarter.
- The EV battery segment experienced weakened profitability due to slower EU demand and foreign exchange effects.
- The small battery segment continued to face challenges with slow market recovery and inventory adjustments, impacting results.
- The cylindrical battery business is experiencing a slowdown due to sluggish demand for power tools and e-bikes, with a full recovery not expected until the second half of 2025.
Q & A Highlights
Q: Can you shed some light on the joint venture agreement with GM, particularly regarding GM's decision to adopt prismatic batteries and plans for capacity expansion?
A: Jong-sung Kim, CFO, explained that the joint venture with GM will be located in Indiana, producing prismatic premium P6 batteries for GM from 2027 to 2034. The initial capacity is 27 GWh per year, with potential expansion to 36 GWh. GM chose prismatic cells for their high energy density, meeting the demand for longer driving ranges in the US. Samsung SDI is exploring further expansion options in the US, including JVs with other OEMs.
Q: With the US election approaching, what are the projected timelines for SPE's production lines, and what is the outlook for the European EV market?
A: Michael Son, EVP, stated that SPE's first line will start in December, with subsequent lines starting quarterly in 2025, totaling 33 GWh annually. In Europe, despite a 2% market decline, demand is expected to improve due to tighter CO2 regulations and policy support, potentially increasing EV demand by 25% in 2025.
Q: What are the main drivers behind the recent demand increase in the US ESS market, and what is the projected profitability?
A: Michael Son highlighted that the demand for ESS is driven by rising electricity needs, AI industry growth, and renewable energy expansion. US ESS demand is expected to grow significantly, with Samsung SDI's SBB product improving sales and profitability. Stable orders from major US utilities are expected to sustain future earnings growth.
Q: What is Samsung SDI's strategy for the Electronic Materials business following the sale of the polarizer film business?
A: Jong-sung Kim stated that the focus will be on developing new materials in semiconductor, OLED, and battery materials through R&D investments. The strategy includes securing new technologies and expanding into new markets, aiming for profitable growth despite the short-term sales volume reduction from the divestment.
Q: What is the progress on LFP batteries for ESS, and what are the plans for capacity expansion and overseas locations?
A: Michael Son mentioned that Samsung SDI has completed verification of large-sized LFP cells and started constructing a mother line in Ulsan, aiming for mass production by 2026. The company plans to expand LFP capacity and is considering the US as a priority for overseas production, responding to market demand and policy changes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
