Good morning and good evening. First of all, thank you all for joining this conference call. Now we will begin the conference of the fiscal year 2020 second quarter earnings results by Samsung SDI. This conference will start with a presentation followed by a divisional Q&A session. If you have a question, please press star key and number one on your phone during the Q&A session. Now we shall commence the presentation on the fiscal year 2020 second quarter earnings results by Samsung SDI. Good afternoon. I am Yoontae Kim, Vice President of the Business Management Office at Samsung SDI. Before we begin, I would like to introduce the management team attending today's conference call. Our CFO, Jongsung Kim , Head of the Electronic Material Strategy Marketing team, Kwang-Sung Kim, and Head of the Battery Marketing Strategy group, Hun-j un Kim , are with us today.
We will now start the second quarter 2020 earnings call. First, we will announce the second quarter results. Second quarter revenue recorded KRW 2,558.6 billion, increased 7% quarter-over-quarter, and 6% year-over-year. By business division, battery revenue recorded KRW 1,918.7 billion, and Electronic Materials revenue recorded KRW 638.1 billion. Operating profits saw 92% increase quarter-over-quarter, with KRW 103.8 billion and 34% decrease year-over-year. We saw pre-tax loss of KRW 85.6 billion and a net profit of KRW 47.7 billion. Next, I will move on to the financial status. Assets as of the end of the quarter was KRW 20,540 billion, up by KRW 653.1 billion quarter-over-quarter.
Current assets went up by KRW 227.2 billion quarter-on-quarter, and non-current assets also saw an increase by KRW 425.9 billion, driven by CapEx and increased value of stock holdings. Liabilities increased to KRW 7,887.9 billion, up by KRW 465.3 billion quarter-on-quarter as a result of an increase of debt and accounts payable. Shareholders' equity recorded KRW 12,652.1 billion, and a KRW 187.7 billion increase caused by other comprehensive income and retained earnings. Next is the second quarter performance by business division and the second half outlook. First, automotive and ESS battery division saw a significant increase in revenue year-on-year and also saw a slight increase quarter-on-quarter. EV battery revenue dropped quarter-on-quarter since clients stopped operating production lines due to the COVID-19 pandemic.
ESS batteries recorded increase of domestic and international revenue quarter-over-quarter, thanks to domestic demand recovery and the U.S. utility project. In the second half of 2020, we expect a substantial revenue growth and improved profitability. For automotive battery, we expect a significant increase in sales as European countries have further introduced electric vehicle subsidy policies, and ESS sales are expected to rise driven by overseas utility projects. Next, moving on to the small-sized battery division. Second quarter small-sized battery revenue went down year-over-year caused by the COVID-19 pandemic, but went up quarter-over-quarter. Cylindrical battery revenue went up for major applications such as power tools, e-bikes, e-scooters, and cleaners, thanks to the base effects of the first quarter. Polymer battery shipments and revenue declined mainly in flagship smartphones as weak demand for smartphone continues.
In the second half, the revenue will go up, driven by cylindrical batteries. As the demand for personal mobility device rises, cylindrical battery sales are to increase led by micro mobility, such as e-bikes and e-scooters. Polymer battery sales are expected to increase as major clients release flagship smartphones. Next, we are moving on to electronic materials business. In the second quarter, we saw 10% and 6% increase year-on-year and quarter-on-quarter respectively. Semiconductor materials had the increased revenue quarter-on-quarter as server DRAM demand went up, and polarizer revenue rose quarter-on-quarter, driven by increased sales for IT devices such as tablet PCs and laptops. Meanwhile, OLED material revenue declined quarter-on-quarter due to low demand for smartphones. In the second half, the revenue will grow led by semiconductor and OLED materials, improving profitability.
Semiconductor materials are to have solid revenue following the first half of 2020. Polarizer revenue will slightly decline with the low demand for IT devices, but OLED materials revenue will significantly increase as new smartphones and TVs are released. This completes the presentation, and we will now begin the Q&A session. All questions and answers will be interpreted in English consecutively. Please follow the operator instructions to ask questions.
[Non-English content] Now, Q&A session will begin. Please press star one, that is star and one, if you have any questions. Questions will be taken according to the order you have pressed the number star one. For cancellation, please press star two, that is star and two, on your phone. [Non-English content] The first question will be presented by Wooyoung Jo from HSBC. Please go ahead with your question.
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Thank you for giving me the chance to ask questions. I have one for small batteries and another one for electronic materials. The first question is the demand for flagship smartphone in the first half was weak. In the second half, major customers have plans to launch flagship smartphones. What is the forecast for the polymer battery performance? What are your plans for supplying coin cell battery for TWS? My second question is, do you think the demand for OLED materials will pick up in the second half? Although performance was weak in the first half, is there a possibility for YoY growth on an annualized basis?
예, 첫 번째 답변드리겠습니다. 상반기에는 COVID-19 영향으로 스마트폰 시장이 약세를 보였는데, 하반기에는 주요 고객사들이 플래그십 스마트폰을 출시하면서 당사 판매가 늘어나고 수익성도 개선될 전망입니다. 또한 재택근무, 재택수업 확대로 노트북 수요가 늘면서 노트북용 폴리머 전지 판매도 증가해 폴리머 전지 실적 개선에 도움이 될 것입니다. TWS용 코인 셀은 고객 승인을 마치고 하반기부터 공급을 시작했습니다. 올해 신규 진입을 계기로 시장에서 기술력을 인정받고, 내년부터는 고객군을 늘려 본격적으로 공급을 확대해 나갈 계획입니다.
Let me answer the first question. In the first half, the smartphone market was hit by COVID-19. With the customers launching flagship smartphones in the second half, our company's sales are expected to go up and profitability to improve. The demand for notebook PC increased as more people worked from home and took online classes. Higher sales of polymer batteries for notebook will lead to improved performance for polymer battery. After getting customer approval, we began supply of coin cell for TWS in the second half. With the new entry in the market this year, we plan to get market acceptance on our technology and increase customer base and expand supply in earnest beginning next year.
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Yes, this is Kim Kwang-Sung , Head of the Electronic Materials Strategic Marketing Team. The OLED material revenue in the first half was partially affected by the slowdown in the flagship smartphone demand, but continued to grow YoY. In the second half, major customers will be releasing new smartphone, and the demand for TV OLED panels is expected to increase. As a result, the demand for our company's green-host, TFE, and p-dopant will increase, leading to improvement in both top line and bottom line on an annual basis.
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[Non-English content] The next question will be presented by SK Kim from Daiwa. Please go ahead with your question.
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Congratulations on a good quarter. I have two questions. One is on large battery, and the second one is on electronic materials. The first question is, expectations are high for mid to long term growth in the EV market. Could you comment on the mid-to-long-term capacity and growth plan? The second question is, starting from last year, the localization of materials, components, and equipment was the buzzword in the IT industry, and there are companies who have made quite a progress, and I believe Samsung SDI has the competencies and the conditions to achieve good results amidst this trend. Are there any new materials that you're currently working on?
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Thank you for the question. I'm the CFO, and I'll answer the first question. Despite concerns over COVID-19 dampening the demand for EVs and temporary difficulties during which many OEM manufacturers had suspended production, the EV market is quickly normalizing. Our company achieved more than 60% revenue growth in the automotive battery business last year, and despite the pandemic, we expect a 50% higher growth year-over-year and huge improvement in profitability. Next year, through uninterrupted supply of new battery type, we hope to record a similar level of revenue as this year, and it is our goal to turn to profit in the automotive battery business. We will use this as a springboard to further our mid-to-long-term growth.
We will continue to make investment next year, focusing on the plant in Hungary as we did this year, and we're complying with the delivery schedule agreed with the customer. In order to preempt future technologies in the long term, we are concentrating on differentiated battery technology and material development. We are also exerting effort to improve our operational excellence so that we can expand global supply in a timely manner. The EV market growth is taking off, and the competition is getting fiercer, but we will be equipped with the right competitive edge to meet the market's expectations.
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Let me answer the second question. Even if it weren't for the material localization efforts, the nature of the electronic materials business has it that in order to enable mid to long term growth, it is vital to develop new materials that are aligned with the technology development of the downstream industry and the customers changing technology. With this in mind, our company is keeping up with the customer strategies and technology trend and is developing many new materials. To pick out the key strategic technological trends in the semiconductor business, it is non-memory and EUV, and in display, QD display and foldable OLED expansion are important. Our company has selected and is developing the new materials reflective of the technology trend in each market segment. Depending on the materials, some may be commercialized within a year, and others may take up more than three years for preparation.
We will do our best to closely cooperate with the customers, develop and roll out new materials in a timely manner so that the electronic materials business can achieve sound growth over the mid to long term horizon.
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[Non-English content] The next question will be presented by [Non-English content] from NH Securities. Please go ahead with your question.
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Thank you. This is [Non-English content] from NH Investment & Securities. I have two questions on batteries. The first question is, the European nations are increasing EV subsidies as a COVID-19 rescue measure for the automotive industry. How much impact do you think it will have on the EV demand in the second half of the year? How much improvement in Samsung SDI's automotive battery sales? The second question is about next gen batteries. The market is keen on next generation batteries. Could you share with us the future direction going forward for battery development and the current status of solid-state battery development at SDI? Thank you.
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Thank you for the questions. I am Kim Hun-jun, Head of Battery Strategic Marketing. As to your first question, with the EV incentives raised in major European countries starting in June, battery EVs are sold at a maximum 51% discount price from the original shipping price, and plug-in hybrid EVs prices are 10%-20% lower than the comparable internal combustion engine models, making them price competitive. Therefore, in the second half, along with the new model launches, last year's models will enjoy higher sales, and we expect the EV demand to go up significantly compared to the first half. We expect our company's sales in the second half to grow by more than 50% compared to the first half, and hopefully profitability will greatly improve along with higher revenues.
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Let me continue with the answer to your second question. The EV market is in need of batteries that have high energy density, longer cycle life, fast charging function and price competitiveness. Higher energy density batteries give EVs more mileage. Our company plans to increase the energy density by applying high nickel cathode material and silicon added anode material. To extend the total battery life, we're using conductive agents and additives to improve the cycle life. With higher penetration of EVs, demand for fast charging is expected to go up. Our company is conducting research on how the lithium ion can move faster and more easily in the anode. Based on the results, we plan to drastically cut down on the charging time. We plan to bring down the total material cost by applying price competitive materials and going with lighter modules and packs with simplified structure.
As for solid-state battery technology, it can improve energy density and safety significantly over LIB. We have proven material technology from LIB, and by combining it with the new proprietary material developed, including solid-state electrolyte, we have confirmation that it is possible to develop batteries with high energy density and high safety. Currently, we're developing the mass production technology and making necessary preparations to apply it to the actual automotive battery.
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[Non-English content] The next question will be presented by Sang Woo Kim from Credit Suisse. Please go ahead with your question.
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I have three questions. The first has to do with ESS. I understand that the ESS safety reinforcement measures have been complete, will it be possible for profitability to recover from the second half? How has the market changed since COVID-19? The second question has to do with polarizer. It seems as if COVID-19 and Korean customers' decision to discontinue its LCD production have had limited impact on Samsung SDI's polarizer business. What is the reason? Can we expect the segment to grow compared to the previous year? My last question has to do with semi material. There is concern in the market about the DRAM price falling in the second half. Apart from the price fall, what is your outlook on the demand and performance of semiconductor materials? Thank you.
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Thank you for the questions. I am Kim Hun -jun, Head of Battery Strategic Marketing Team. As to your first question, safety reinforcement measures for ESS were implemented in 1,000 sites in Korea. Except for the 10 or so sites experiencing delay due to the customer circumstances, the safety measures have been completed. In the second half, a large scale U.S. utility project will be carried out, which is expected to improve both top and bottom line for ESS. Looking at the market situation since the outbreak, many countries have included new and renewable energy promotion policies in their stimulus packages, so the environment for the ESS industry is growing more favorable. The U.S. is continuing with its plans to achieve zero carbon emission by 2050. Europe adjusted the existing eco-friendly targets upward and announced its EUR 1 trillion investment plan.
Korea also has plans to invest KRW 73 trillion by 2025 in the eco-friendly low carbon industries through the Green New Deal policy. The green trend in the market is expected to increase the portion of new and renewable energy in the mix and lead to higher ESS demand. Let me take over and answer the rest of the questions. In the first half, although we had some negative market situations, what with the customers' LCD business shutdown and COVID-19, we were able to record a sound revenue by increasing supply for large screen TVs for the Chinese market, as well as tablet and notebook PCs. In the second half, we expect the IT demand to slow down compared to the first half, but the demand for the TV product is expected to remain resilient. Despite the pandemic, we overachieved our original revenue target in the first half.
In the second half, we will do our best to increase sales of our high value-add large screen products that we are competitive in so that we can achieve a YoY growth. As to your last question, our company's demand for semiconductor materials is affected not so much by the semiconductor price, but more by the customer's wafer volume and process miniaturization. In the second half, looking at the wafer inventory status of the customer, we expect the customer's wafer volume to slightly increase over the first half. Major customers DRAM process miniaturization is ongoing, so we expect the sales of our company's semiconductor materials to remain robust as well.
[Non-English content] The last question will be presented by Hyunsoo Kim from Hana Financial Investment. Please go ahead with your question.
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Thank you. I have two questions. They are both about cylindrical batteries, one for mobility and the other one for EV. My first question is, could you share with us the demand forecast in the second half and next year for cylindrical batteries, and that by different applications such as power tools, micro-mobility, et cetera? My second question is, Tesla's EV sales numbers are going up, it has plans to build new gigafactories in Germany and the U.S., battery demand is expected to grow. Is there a possibility you may be supplying to Tesla? What is the business forecast for Samsung SDI's cylindrical batteries for EV? Thank you.
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Thank you for the questions. This is Kim Hun -jun, Head of Battery Strategic Marketing Team. As to your first question, the demand for cylindrical batteries began to show recovery signs in Q2, and the trend is likely to continue in the second half. By application, due to COVID-19, people avoid public transportation and prefer personal mobility, such as e-bike and e-scooters, the demand for micro mobility is greatly increasing. Because of social distancing and working from home, people spend more hours at home and pay more attention to cleanliness and sanitation. Thus, the demand for cordless vacuum cleaners is increasing. The power tools and gardening tools hit bottom in the first quarter and are expected to grow quarter on quarter. With this trend, the demand for cylindricals is expected to grow 30% compared to the first half and show clear signs of recovery in the second half.
There is too much uncertainty to provide a forecast for 2021. We believe the mobility market will continue to grow significantly next year and the power tool market to grow at a more moderate pace. Against this backdrop, our company will reinforce the medium output product lines to respond to the growing demand in the mobility market and lead the high output product market with our excellent technology.
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As to your second question, recently in the cylindrical batteries, the demand for EV is going up, our company's discussing potential cooperation with many OEMs. I am afraid I am unable to comment on specific customers. This year's sales figures for EV cylindrical batteries are expected to be still minimal, starting next year, we will see bigger contribution to revenue as we begin supplying to new projects. We expect steady growth in the mid to long term.