LG Electronics operating profit up 20.2 pct in Q1
LG Electronics operating profit up 20.2 pct in Q1
  • Kim Jung-mi
  • 승인 2018.04.29 08:25
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LG Electronics Inc. said Thursday its first-quarter operating profit moved up 20.2 percent on-year helped by robust sales of premium home appliances, although its handset sales remained weak.

The company's operating profit reached 1.1 trillion won in the three month period, with sales increasing 3.2 percent to 15.1 trillion won, the regulatory filing showed.

Net profit, however, came to 729.9 billion won (US$674 million), down a sharp 12.7 percent from 835.7 billion won posted a year earlier, the company said.

The first-quarter operating profit is in line with the 1.1 trillion won forecast made during the company's preliminary guidance report released earlier this month.

It marks the highest operating profit posted by LG Electronics for the January-March period. It is also the first time the consumer electronics giant posted an operating profit above 1 trillion won since the second quarter of 2009.

Shown in the picture released by LG Electronics Inc. on April 3, 2018, is South Korea's popular K-pop band BTS, which recently became the new model for the tech company. (Yonhap)

LG Electronics said the improved operating profit came on solid demand for premium home appliances and TVs. The mobile business, however, continued to post shortfall in the first quarter of 2018.

The company said the home appliances business posted an operating profit of 553.1 billion won, up 8.2 percent from a year earlier. LG said the improvement came as the company reduced production costs while expanding sales of premium products, successfully overcoming the rising costs of materials.

LG said the sales of dryers, Styler clothing care systems, and air purifiers increased in South Korea, with shipments to the European, Asian, and South American markets all gaining ground. Sales of this division moved up 9.3 percent on-year to reach 4.9 trillion won.

As for the home entertainment business, its operating profit jumped 76.5 percent to reach 577.3 billion won, helped by strong sales of high-end OLED TVs and Ultra HD TVs. Sales advanced 7.4 percent on-year to 4.1 trillion won, LG added.

The company said it marked the first time for the division to post a two-digit growth in terms of operating profit.

The mobile communications business, which suffered shortfalls in previous quarters, also remained in losses. The division posted an operating loss of 136.1 billion won.

Accordingly, LG's mobile operations have effectively posted an operating loss for the 12th consecutive quarter as of the January-March period.

It did manage to report an operating profit of 3.7 billion won in the first quarter of 2017, but the gain was made possible through a later adjustment by reflecting returns from its accessories business. LG originally said it posted a shortfall for the period.

The first-quarter earnings of the mobile division were still an improvement from losses of 213.2 billion won posted in the October-December period of 2017.

LG sold 11.4 million smartphones units in the first quarter, down 23 percent from a year earlier. Amid lack of new models, it spent less on marketing.

The vehicle components business that is being built up by the company also posted an operating loss of 17 billion won. The company said the losses came as it continued to make investments for future profits.

The business-to-business segment posted an operating profit of 78.8 billion won on the back of sales of digital signages and solar-light modules.

As for the second quarter, LG said it expects stronger sales for its air conditioners and refrigerator products on the back of seasonal demand. The company said it will actively cope with the rising demand through high-end products, including the premium LG Signature line.

The sales of TVs are also anticipated to grow on the back of major global sports events, the company said. LG said it is planning to expand sales of premium OLED TVs and seek better profits.

Considering the ailing smartphone business, LG said it is planning to revitalize the division through the LG G7 ThinQ, which will be showcased next month. The company, however, said the smartphone market is set to post sluggish growth with competition also expected to intensify.

"We expect sales of the G7 ThinQ to be higher than the predecessor," LG said during a conference call. "We plan to maintain the recovery trend of profitability by expanding sales and cutting costs, although marketing expenditures may rise."

The LG G7 will come with display brightness of a whopping 1,000 nits, a measure that refers to one candela per square meter. A higher figure indicates a brighter display. LG added that the upcoming smartphone will consume 30 percent less power compared with the previous G6, hinting that users will be able to enjoy a "Super Bright Display" without being concerned about battery life shortage.

The new smartphone will also come with a "New Second Screen" at the top of the display, which will be similar to the notch design of U.S. tech giant Apple Inc.'s iPhone X. LG also tapped South Korea's popular K-pop band BTS to promote its new smartphones in the global market.

LG said it will continue to release more products under its artificial-intelligence brand, LG ThinQ, and also set eyes on the robot industry to foster it as a new growth engine.

Shares of LG Electronics closed 1 percent higher on Thursday at 101,000 won. The first quarter report was released during the market hours. (Yonhap)

LG corporate sign outside its main office in Seoul (Yonhap)

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