LG Energy Solution 2025 Annual Results: Operating Profit Doubles to KRW 1.35 Trillion, Yet Shareholders Post a KRW 1.07 Trillion Loss

Key takeaways

• LG Energy Solution’s group operating profit rose 134.0% to KRW 1,346,120 million (~$1.0 billion), while total revenue fell 7.6% to KRW 23,671,759 million (~$17.5 billion).
• Despite the higher operating profit, the profit attributable to the owners of the Parent was a loss of KRW (1,072,810) million — a loss that widened from KRW (1,018,741) million in 2024. Nearly all reported group profit went to non-controlling interests (KRW 1,153,613 million).
• A US IRA Advanced Manufacturing Production Tax Credit (AMPC) of KRW 1,646,811 million was recognized in other operating income — an amount that exceeds the entire group operating profit of KRW 1,346,120 million.
• ESS is not disclosed as a separate segment. LGES reports a single operating segment covering “automotive batteries, mobile batteries, ESS batteries and others.” There is no ESS revenue, no GWh figure, and no ESS margin in this filing.
• As of the reporting date the Group did not comply with financial covenants (borrowings-to-EBITDA below 4.0x) on syndicated and EIB loans; affected long-term borrowings were reclassified as current liabilities, with waiver/amendment discussions ongoing.

1. A note on ESS disclosure

This article is based on LG Energy Solution’s audited consolidated financial statements for the year ended December 31, 2025 (K-IFRS, Deloitte Anjin unqualified opinion dated March 5, 2026). This is the audit report, not a management discussion and analysis (MD&A) annual report, and it does not contain an operational ESS commentary.

Critically, LGES reports a single reportable segment. Note 32(1) describes its products as “automotive batteries, mobile batteries, ESS batteries and others” (p.96). There is no separate ESS revenue line, no ESS shipment figure in GWh, no ESS gross margin, and no ESS production capacity disclosed in this filing. The only forward-looking market statement on energy storage in the document is a single business-overview sentence (p.6):

“Demand for ESS is expanding with an increasing importance of efficient usage of electricity and generation of renewable energy.”

Everything below is therefore group-level, with the ESS-relevant subsidiaries and commitments identified where the filing names them. We do not estimate an ESS split, because the filing does not provide one.

2. Headline numbers

Revenue declined 7.6% to KRW 23,671,759 million (~$17.5 billion at ~1,350 KRW/USD, approximate), while cost of sales fell faster (−12.5%). That lifted gross profit 24.3% and expanded gross margin from 13.3% to 17.9%. Operating profit rose 134.0% to KRW 1,346,120 million (p.2, p.80, p.96).

Below the operating line the picture reverses. Profit before tax was KRW 414,124 million, but income tax expense of KRW 333,321 million — up sharply from KRW 10,269 million in 2024, an effective rate of 80.49% (p.85) — cut profit for the year (including non-controlling interests) to KRW 80,803 million, down 76.1%.

3. The critical nuance: group profit, but a loss for LGES shareholders

The single most important line in this filing is the split of that KRW 80,803 million of profit:

• Owners of the Parent (LGES shareholders): a loss of KRW (1,072,810) million — wider than the KRW (1,018,741) million loss in 2024.
• Non-controlling interests: profit of KRW 1,153,613 million.

In other words, all of the group’s reported profit — and more — accrued to non-controlling interests in consolidated entities, while the portion attributable to LGES’s own shareholders was a loss for the second consecutive year. Basic and diluted EPS were a loss of KRW (4,585), versus a loss of KRW (4,354) in 2024 (p.86). A headline of “operating profit up 134%” and a reality of “widening bottom-line loss for shareholders” sit side by side in the same statement.

4. The AMPC dependence

The recovery in operating profit is inseparable from the US Inflation Reduction Act. LGES recognized a US IRA Advanced Manufacturing Production Tax Credit (AMPC) of KRW 1,646,811 million in other operating income in 2025, up from KRW 1,480,020 million in 2024 (p.80, Note 21).

That AMPC amount exceeds the entire group operating profit of KRW 1,346,120 million. Mechanically, without the AMPC benefit the group’s operating result would have been near or below break-even. This makes LGES’s reported profitability structurally dependent on US production tax credits, and therefore on the continuity of the IRA framework and on production volumes at its US-based manufacturing.

5. ESS-relevant entities and commitments

While ESS is not a reported segment, the notes do name entities and commitments tied to energy storage (p.7, p.60, p.78):

• LG Energy Solution Arizona ESS, Inc. (USA) — ESS manufacturing and sales.
• LG Energy Solution Vertech Inc. (USA) — ESS installation and integration.
• LG Energy Solution Europe / Australia / Japan — ESS battery sales.
• Jeju Bukchon BESS Power Plant Co., Ltd. — a new Korean BESS-plant associate, 10% held, acquired for KRW 900 million (p.60).
• Arizona new-plant construction commitment of USD 2,048 million (p.78).

These confirm an active ESS manufacturing, integration, and sales footprint across the US, Europe, and Asia-Pacific, but the filing attaches no revenue, volume, or margin figures to them.

6. Geographic revenue

Revenue by location of sale (Note 32(4), p.96, KRW millions):

The Americas were the largest market at KRW 10,142,970 million, or 42.8% of 2025 sales, consistent with the US AMPC and Arizona ESS footprint noted above. Europe recorded the sharpest decline, from KRW 7,028,980 million to KRW 4,879,060 million, while Korea rose from KRW 1,747,024 million to KRW 2,677,968 million.

Customer concentration is high. Note 32(5) discloses three customers each accounting for at least 10% of revenue — KRW 4,845,460 million, KRW 4,591,682 million, and KRW 2,910,177 million — together roughly 52% of 2025 revenue. The filing does not name them.

7. Balance sheet, cash flow, and R&D

Total assets grew 11.3% to KRW 67,147,953 million, but total equity fell 5.3% to KRW 29,321,676 million (p.1). Total borrowings rose 46.3% to KRW 22,512,096 million, pushing gearing from 27.1% to 39.0% and debt-to-equity from 94.7% to 129.0% (p.46, p.68).

Net operating cash flow of KRW 4,432,277 million (−13.3%) did not cover capex of KRW 10,833,917 million, though capex itself declined 12.6% year-on-year (p.5). R&D expense rose 23.3% to KRW 1,304,210 million (p.66).

8. Market context

The filing contains only one forward-looking ESS market statement (p.6): “Demand for ESS is expanding with an increasing importance of efficient usage of electricity and generation of renewable energy.” Beyond that single sentence, the audited statements provide no market sizing, competitive positioning, or ESS demand forecast. Readers looking for LGES’s operational ESS narrative will not find it in this document; it is an audit report, not an MD&A.

9. What to watch

Several items in the filing warrant monitoring:

Covenant breach and reclassification. As of the reporting date, the Group did not comply with financial covenants (borrowings-to-EBITDA below 4.0x) on syndicated loans (ANZ / HSBC / JPM) and EIB borrowings. The affected long-term borrowings were reclassified as current liabilities, and amendment or waiver discussions were ongoing (p.69, Note 14).

AMPC dependence. With the KRW 1,646,811 million AMPC exceeding operating profit, the durability of reported profitability is tied to the IRA credit and to US production volumes. Any change to the credit or to output would flow directly to the operating result.

Rising leverage against negative shareholder earnings. Borrowings rose 46.3% and equity fell 5.3% while the loss attributable to owners widened for a second year. The filing also notes KRW 595,701 million of deferred tax assets de-recognized (p.85), and that a 10% USD appreciation would reduce pre-tax profit by KRW 688,678 million (p.41).

Warranty, litigation, and JV commitments. A warranty provision of KRW 1,549,908 million stood at year-end (flagged as a Key Audit Matter), alongside litigation including the GM Bolt EV recall and mobile-battery class actions (p.78). Committed JV and expansion outlays are substantial: Honda (USD 1,802 million), Stellantis (USD 1,464 million), Arizona (USD 2,048 million), plus the March 2025 acquisition of Ultium Plant 3 assets by LGES Michigan for USD 2,154 million.

10. Sources

All data in this article is sourced from LG Energy Solution’s official audited consolidated financial statements for the year ended December 31, 2025, published by LG Energy Solution.

• LG Energy Solution 2025 Audited Consolidated Financial Statements — Annual Report (PDF) — K-IFRS, Deloitte Anjin unqualified opinion dated March 5, 2026. Audit report only; no MD&A.
• LG Energy Solution Manufacturer Profile — BESS Manufacturers directory page
• USD conversions are approximate at ~1,350 KRW/USD; the filing does not disclose a KRW/USD rate.