The following is excerpted from the question-and-answer section of the transcript.
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Question: Daniel Kim - Macquarie Research - Analyst
: [Interpreted] I have 2 questions. First question is about the batteries for power tools. As you mentioned during your presentation, there are
expectations that the U.S. housing market will slow down in the second half. Wouldn't that also result in a decreased demand in power tools? So
do you think that you'll be able to maintain your profitability in the power tool battery business in the second half?
Second question is also tied to that because it's about small batteries. As you expect, your small-sized battery supply for EV and e-bike applications
to increase and possibly, there will be a decrease of your power to battery cells, would that result in a shift in your product mix within the cylindrical
battery business? Would that change in product mix, increase of EV and e-bike, decrease of power tool possibly result in a decrease of your margins?
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JULY 29, 2022 / 1:00AM, 006400.KS - Q2 2022 Samsung SDI Co Ltd Earnings Call
Unidentified Company Representative
[Interpreted] To answer your first question, the interest rate increase and economic recession has caused the U.S. housing index to decline, and
we do see an increase in channel inventory, especially around consumer power tools. This indicates that the power to battery demand is likely to
grow, but grow at a slower pace than originally expected during the second half.
However, as a leader in the power to cylindrical battery segment, we enjoy the benefit of strong partnerships based on long-term supply agreements
with global top players in power tools. And so we expect that by focusing on professional power tools, including construction tools around the
high-performance product lineup, we will be able to maintain the growth trend.
Within power tools, the demand for construction tools or outdoor tools that use high-power battery is expected to be relatively more stable and
remain solid even in the second half. So while overall market situation may be somewhat challenging, we will address this by strengthening our
high-end product portfolio and closely cooperating with our customers to continue revenue growth and maintain profitability.
Regarding your second question, in general, the high-power output batteries that are used in applications such as power tools or vacuum cleaners,
do have a relatively higher margin than compared to the mid-power output batteries that are used for mobility applications because there's a
greater opportunity to use technology for product differentiation in the high-power batteries.
But then mobility demand by nature is less sensitive to short-term changes, and this is a source of stable mid- to long-term volume. Also mobility
products actually use more cells per product. Also, we are using relatively a smaller number of battery types to supply to a large volume of mobility
application demand which gives us the opportunity for better production efficiency and better margins is produced at high volumes.
Also in terms of the cylindrical batteries, we have cylindrical battery for EV applications which was only in the initial stage of supply during the first
half, but we expect volumes to increase meaningfully during the second half, which would contribute to significant improvement in margins.
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