LG Electronics swings to profit
LG Electronics announced Wednesday that it swung back to the black for the first quarter of the year thanks to improving sales in its main markets of consumer electronics and mobile devices.
The electronics giant posted a net profit of 242.5 billion won (about $212.5 million) for the three months to March, a dramatic turnaround from a 15.7 billion won loss in the same period last year.
It recorded an operating profit of 448.2 billion won, up 242.5 percent increase from the same period last year. However, revenue declined by more than 7 percent year-on-year at 12.2 trillion won.
LG Electronics has struggled to keep up with industry rivals like Samsung Electronics and Apple in recent years and paid dearly for falling behind on mobile Internet devices like smartphones and touch-screen tablets.
While the company’s bright start to 2012 has been engineered by improving sales for high-end products in televisions and mobile devices and its strength in the corporate market for air-conditioning systems, market observers say it’s too early to judge whether the company’s rebound will have staying power.
Despite increasing sales, it’s hard to find products that are creating true excitement amid the company’s deepening lineup of me-too creations.
The firm remains an also-ran in the smartphone market that is increasingly shaping up as a duopoly between Apple and Samsung Electronics. Chinese makers like ZTE and Huawei are hot on LG’s heels in mobile devices. And it can’t be said that it is a trend-setter in televisions they way Samsung and Sony are.
“To put it simply, LG Electronics was saved in the first quarter by its sales in smartphones and televisions. I think the company has its worst times behind it and will see gradual improvement in profit throughout the year,” said Kim Sung-in, a senior analyst at Kiwoom Securities, a leading local brokerage.
The company’s home entertainment goods drove profits in the first quarter, thanks to strong sales of high-end televisions, including models supporting stereoscopic 3D video.
Its mobile communication division, which handles the smartphone business, continued the quarterly winning streaks in profit for the second straight quarter.
Smartphones accounted for 36 percent of the company’s total phone shipments for the first quarter, accounting for the highest proportion ever.
The company’s home appliances and air-conditioning divisions have also enjoyed a strong start to the year.
“The numbers are looking good. But LG Electronics will face tougher competition from Samsung Electronics, Apple and even the Chinese makers,” said Lim Dol-yi, an analyst at Solomon Investment.
No matter what smartphone LG Electronics releases in the coming months, it’s all but assured to be upstaged by Samsung’s upcoming Galaxy SIII and Apple’s newest iPhone, which may or may not be named the iPhone 5.
“You don’t have to be surprised about LG’s quarterly results as it experienced its worst ones last year. Improvement is wider-than-expected. The key point is that LG is coming under increasing competition even in the low-end handset market,” said a fund manager from a U.S.-based investment bank in Seoul in a telephone interview, requesting anonymity.
“That’s why we are not considering buying more LG Electronics stocks. We will wait more,” the manager said.
LG is also competing with Samsung in the race for premium organic light emitting diode (OLED) televisions, though DisplaySearch denied any possibilities for an immediate market surge citing higher prices and technological problems the companies should ease.