The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Won Suk Chung - HI Investment & Securities Co., Ltd., Research Division - Analyst
: [Interpreted] I have 2 questions. The first question is, can you share with us some business outlook for each of the divisions?
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JANUARY 28, 2021 / 4:30AM, 006400.KS - Q4 2020 Samsung SDI Co Ltd Earnings Call
The second question regards to the provisioning related with the EV battery quality issue that you mentioned during the presentation. Can you
give us an update on the investigation into the cause of that quality issue at the customer's end? And also, I think we were expecting the EV battery
business to hit BEP in the fourth quarter. Was it the provisioning that kept it from hitting BEP? And if so, can we expect the EV battery business to
break even during this quarter?
Jongsung Kim
[Interpreted] This is CFO, Jongsung Kim, and Head of Business Support. Before sharing our business outlook for year 2021, I would like to say that
it is a great pleasure to speak to our shareholders and analysts through today's call. Placed in the path of a dynamic industrial change from drivers
such as eco-friendliness, automotive -- autonomous driving, AI and 5G, Samsung SDI is well positioned to capture huge growth opportunities. And
as a CFO, I will remain committed putting Samsung SDI in the right track to capture this growth and to deliver solid performance.
Now with that, I would like to go over the business outlook by division for this year. Even though uncertainties related with COVID-19 appears likely
to continue throughout this year, we are focusing on achieving another year of volume growth, especially around automotive batteries and
continuing to improve our profitability at the same time. By division, the EV battery is expected to continue significant revenue growth this year
as EV demand expands. And so we are looking forward to reaching BEP on a full year basis with increased shipments and improved product mix.
And we're also preparing for a stable supply of the Gen5 batteries, which are scheduled for mass production in the second half of this year.
To continue with the other division outlook, for ESS, our overseas utility demand is showing rapid growth, and we will focus on increasing revenue
and profitability by preparing specialized cells with optimal performance characteristics based on safety and also cost competitiveness. For the
small batteries, we plan to achieve better profitability with high-power, high-capacity products targeting the power tool and micromobility markets,
where we are maintaining high market share while, at the same time, preparing products with optimized performance characteristics specific to
key application areas such as EV, ESS and wearable devices. So we aim this year to achieve double-digit revenue growth while also improving
profitability.
For the electronic materials business, we plan to maintain high utilization of polarizer films again this year and to expand sales of OLED and
semiconductor materials, which are likely to benefit from the growth of the downstream demand. We will also secure new materials to capture
growth opportunities related with EUV and foldable displays. Looking back on year 2020, despite the challenges brought on by COVID-19, we were
able to achieve meaningful growth. And this year, our focus will be on achieving top line growth while also improving the profit structure of all of
our business divisions to strengthen our fundamentals for sustained growth. Thank you.
Unidentified Company Representative
[Interpreted] To answer your second question about the provisioning with the EV battery, you've asked for the update on the quality issue
investigation. Regarding the cause of the quality issue of the customer, the cause has not yet been clearly identified, and we are participating in
the process of trying to identify the cause together with the customer. On the other hand, currently, our products are being supplied without
disruption under a stronger quality verification process that has been since put into place.
You've also asked about the profitability of the EV battery business fourth quarter as well as what we expect this quarter if we take out the
provisioning. As we mentioned, yes, originally, we had expected that our EV battery business would reach BEP during the fourth quarter. However,
we were not able to meet that target due to the quality cost-related provisioning. Without the provisioning, our EV battery business, however,
showed significant profitability improvement. The first quarter of the year is usually seasonally a weak quarter. So while we do expect revenue
Question: Jeongu Ko - NH Investment & Securities Co., Ltd., Research Division - Analyst
: [Interpreted] I have 2 questions regarding the EV battery business. First question is about capacity and investment plans. Even in 2021, it seems
the downstream EV market itself will accelerate in its growth pace. Do you see any possibilities of your capacity not being able to meet all of the
increasing battery demand? And in that context, does the company, for example, have plans of building new EV battery production sites, for
example, in the North American region?
Second question is about the Gen5 battery, which is scheduled to go into mass production during the second half of this year. With that new mass
production, do you have any concerns of, for example, initial yield issues? And once the Gen5 battery comes into mass production, how much of
a upside would it have on your profitability?
Unidentified Company Representative
[Interpreted] To answer your first question about EV battery capacity for this year, looking back at last year, despite the economic weakness brought
on by COVID-19, one of the markets that continued to grow despite that was the EV market. And this year, the EV market growth is expected to
even accelerate more as many countries introduce stronger environment standards and requirements and the automotive OEMs are pushing
forward with their major EV projects. We are continuing to secure battery capacity in line with customers' mass production schedules. And this
year, we're expecting to increase capacity similar to what we had added last year.
Regarding your question about possible new production sites for EV batteries, given that the projects from European customers account for a large
share of our volume, our Hungarian plant will remain the center of our production for some time being. But we will also -- we plan to carefully look
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