W-SCOPE Corporation

Business Details

This is the core business of the group, engaged in the manufacture and sale of separators (polyolefin microporous membranes) for lithium-ion secondary batteries. Production is carried out under a two-plant system consisting of consolidated subsidiary WSK (South Korea) and equity-method affiliate WCP (South Korea), supplying battery manufacturers in Asia, Europe, and the United States. The company is promoting diversification of applications for EV, consumer, and ESS uses. In the first quarter, revenue increased due to relatively solid shipments for consumer applications, although no notable recovery in European EV demand was observed, and ESS shipments were delayed due to product specification adjustments.

Recent Overview

Solid consumer demand drove Separator Business revenue up 21.6% year on year to ¥589 million, with losses also narrowing significantly.

Revenue for the Separator Business in the first quarter of FY2027 (ending January 2027) (February to April 2026) was ¥589 million (121.6% year on year). While EV-related sales showed a slight upward trend, no notable recovery was observed in the European market, and ESS shipments were delayed due to product specification adjustments. On the other hand, relatively solid consumer shipments contributed to the revenue increase. Segment loss narrowed significantly to ¥645 million from ¥1,305 million in the same period of the prior year. The main customer was W-SCOPE CHUNGJU PLANT (WCP), accounting for ¥548 million (39.6% of revenue).

Key Products

Growth Drivers

• Customers are shifting battery production from EV to ESS applications, and ESS separator shipments are expected to recover to a level exceeding the first-half shortfall from the third quarter onward
• Recovery in demand is expected from the fourth quarter onward based on discussions with Samsung SDI
• Preparations are underway for mass production sales of high-end automotive EV and ESS batteries with new customers
• Recognizing that European EV demand bottomed out in the previous fourth quarter, a gradual recovery is expected
• Profitability improvement effects becoming apparent from the rollout of new film-forming line methods to large-scale lines and the introduction of automated manufacturing process systems

Risks

• Delayed recovery in European EV demand: recovery in the European market remains gradual, with no notable increase yet observed
• ESS shipment delays: shipment delays occurred in the first quarter due to product specification adjustments, with a risk that recovery may not proceed as planned
• Continued equity-method investment losses due to deteriorating performance at WCP (an equity-method affiliate) (¥1,682 million recognized in the first quarter, including a ¥932 million valuation loss related to convertible bonds issued by WCP)
• Continued sluggishness in the North American EV market: battery production volumes at the company's customers remain weak, and demand trends across the supply chain remain unclear
• Customer concentration risk: dependence on the POSCO Group was high at 57.1% in the first quarter
• Crude oil and naphtha price fluctuation risk: the main raw material is naphtha-derived, and rising crude oil prices and supply concerns amid prolonged Middle East tensions directly affect manufacturing costs
• Heavy fixed cost burden: revenue continues to be insufficient to cover fixed costs (personnel expenses, depreciation, etc.), with a full-year operating loss of ¥2,400 million expected