1. What Happened? Lotte Energy Materials Q2 Earnings Breakdown

Lotte Energy Materials reported Q2 2025 revenue of ₩204.9 billion, an operating loss of ₩31.1 billion, and a net loss of ₩51.3 billion. These figures fell considerably short of market expectations, with the widening operating and net losses raising significant concerns.

2. Why the Underperformance? Analyzing the Root Causes

The primary driver of this disappointing performance was the downturn in the Elecfoil division. Revenue declined 23.1% year-over-year due to slowing growth in the global EV and IT markets, increased competition, and customer inventory adjustments. The construction division also struggled due to a slowdown in the construction market. The low production capacity utilization rate (48.1%) highlights the challenging business environment. Macroeconomic factors, including a rising won/dollar exchange rate, persistent interest rate hikes, and increasing raw material prices, also contributed to the decline in profitability.

3. What’s Next? Investment Strategies

In the short term, downward pressure on the stock price is likely, warranting a cautious approach. The medium to long-term outlook presents a mixed bag of positive factors, such as growth in the AI industry and development of next-generation battery materials, and negative factors like continued industry downturn and intensified competition. Therefore, investors should carefully consider the potential for an earnings turnaround after Q3, the company’s efforts to improve profitability, progress in new business ventures, and shareholder return policies before making investment decisions.

4. Investor Action Plan: Key Points to Watch

  • Short-term: Monitor demand recovery timing, cost management initiatives, and pricing power.
  • Long-term: Analyze tangible contributions from new business ventures, competitive landscape changes, and synergy effects within the Lotte Group.