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End-of-day quote Korea Stock Exchange  -  2022-08-11
460500.00 KRW   -2.44%
08/11EU, South Korea say U.S. plan for EV tax breaks may breach WTO rules
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S.Korea's LGES reviews $1.3 bln Arizona battery investment as U.S. inflation bites

06/28/2022 | 08:40pm EDT

SEOUL, June 29 (Reuters) - South Korean battery maker LG Energy Solution Ltd (LGES), a major supplier to U.S. carmakers including Tesla, is reassessing a $1.3 billion investment plan for a Arizona factory citing "unprecedented" economic conditions.

News that South Korea's biggest battery maker is reviewing the plan, unveiled only three months ago, knocked LGES shares down 4.6% on Wednesday. It comes as more firms review business plans, fearing a drop in consumer demand amid roaring U.S. inflation mainly caused by global supply chain disruption.

Tesla is cutting 10% of salaried staff and pausing hiring worldwide, and its Chief Executive Elon Musk predicted last week a U.S. recession was more likely than not.

LEGS said in a statement it was currently reviewing various investment options due to the "unprecedented economic conditions and investment circumstances in the United States."

It did not mention the Arizona plant, but an LGES spokesperson said the company would reevaluate its investment in the standalone factory.

In a separate regulatory filing, LGES said it has been reviewing the timing, size and details of its investment in Arizona due to rising costs caused by worsening global economic environment, adding that nothing has been decided.

Officials with the Arizona Commerce Authority, which works on economic development in the state, could not immediately be reached to comment.

Elsewhere in the United States, LGES is building three plants with General Motors Co in Ohio, Tennessee and Michigan and plans to expand its existing factory in Michigan. A GM spokesman on Wednesday said those plans remain in place.

Analysts attributed LGES' investment review to elevated U.S. inflation, running at its highest level in more than four decades, which could lead to rising costs for materials, construction as well as labour.

"At this point, it would be unlikely for LGES to withdraw its Arizona investment, the company needs to reassess its profitability forecast amid rising cost due to inflation," said Cho Hyun-ryul, an analyst at Samsung Securities.

LGES said in March the Arizona plant would be its first U.S. factory to make cylindrical cells, a type of battery that has been used in Tesla and Lucid vehicles. Construction was to begin in the second quarter of 2022, it said, with mass production to start in 2024.

LGES has also production sites in South Korea, China, Poland, Canada and Indonesia.

($1 = 1,290.8000 won) (Reporting by Heekyong Yang; Additional reporting by Jihoon Lee and Ben Klayman in Detroit; Editing by Kenneth Maxwell and Louise Heavens)

© Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
GENERAL MOTORS COMPANY 2.65% 39.48 Delayed Quote.-32.66%
LG ENERGY SOLUTION, LTD. -2.44% 460500 End-of-day quote.0.00%
LUCID GROUP, INC. 3.15% 18.66 Delayed Quote.-50.96%
SAMSUNG ELECTRONICS CO., LTD. 0.50% 60200 End-of-day quote.-23.12%
SAMSUNG SECURITIES CO., LTD. 0.56% 35700 End-of-day quote.-20.49%
TESLA, INC. 4.68% 900.09 Delayed Quote.-14.83%
VOLKSWAGEN AG 0.94% 148.32 Delayed Quote.-16.43%
08/11EU, South Korea say U.S. plan for EV tax breaks may breach WTO rules
08/11S.Korean shares post biggest gain in over three weeks
08/10S.Korean shares post sharpest decline in a month ahead of U.S. inflation data
08/09S.Korean shares rise as battery shares jump on IRA
08/08S.Korean shares edge up as investors wait for U.S. inflation data
08/05S.Korean shares post third straight weekly gain
08/03S.Korean shares end at seven-week high on easing Sino-U.S. worries
08/02S.Korean shares fall on Sino-U.S. tensions
08/01Nikola to buy battery supplier Romeo Power for $144 million
08/01S.Korean shares end subdued after mixed economic data
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Analyst Recommendations on LG ENERGY SOLUTION, LTD.
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Sales 2022 22 011 B 16,9 B 16,9 B
Net income 2022 872 B 0,67 B 0,67 B
Net cash 2022 4,12 B 0,00 B 0,00 B
P/E ratio 2022 123x
Yield 2022 -
Capitalization 107 757 B 82 599 M 82 599 M
EV / Sales 2022 4,90x
EV / Sales 2023 3,70x
Nbr of Employees -
Free-Float 14,7%
Duration : Period :
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Mean consensus BUY
Number of Analysts 28
Last Close Price 460 500,00 KRW
Average target price 529 172,41 KRW
Spread / Average Target 14,9%
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Young-Soo Kwon Chairman & Chief Executive Officer
Sang-Hyeon Lee Managing Director & Head-Finance
Young-Joon Shin Chief Technology Officer
Mi-Nam Shin Independent Director
Mi-Suk Yeo Independent Director
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