By Kim Yoo-chul
Staff Reporter
LG Electronics, Korea's top-tier consumer electronics company wasn't too pleased with its overall first quarter results. But, by many aspects, it has fared relatively well, thanks to the strong performance of its television and home appliance units.
Good showings from its flat-screen televisions are expected to lead earnings growth at LG Electronics for the remainder of this year as general consumers are buying more LED-backlit LCD TVs, three dimensional TVs, in addition to conventional LCD and plasma TVs amid the global economic recovery.
But it still remains uncertain how dramatically its struggling handset division will break free from the losing business momentum. LG is the world's second-biggest flat-TV maker after Samsung, while it trails Nokia and Samsung in the global handset industry.
On Wednesday, LG said its first quarter operating profit was 529.4 billion won from 515.9 billion won year-on-year, while net profit swung to 674.6 billion won from a loss of 199.9 billion won during the same period. Sales were up 4 percent at 13.7 trillion won.
The figures are based on a consolidated basis, an international accounting measurement including all of LG's overseas performances, according to the company.
"The first quarter was very challenging and the situation won't be significantly different in the second quarter. But more offerings of our smatphone models and buoyant TV sales will help us boost overall profitability," an LG spokesman Jerry Kim said.
Its home entertainment division, which is in charge of the flat-screen television business, reported 5.15 trillion won in sales after it sold 6 million during the first three months.
The home appliance unit achieved 2.38 trillion won in sales, while the unit's operating profit increased by 56 percent at 207 billion won from a year ago, that officials say is thanks to a sales surge in North America and Asia.
But LG failed to remove deeper anxiety over the deteriorating operations in its smartphone business. Sales were slowing down and the unit's profit margin has dropped.
While most handset majors including even Motorola of the United States and Sony, as well as the top threes, are boosting their smartphone lineups to secure the "first mover advantage" in the highly lucrative sector, LG lags far behind.
It doesn't have its own mobile platform and its smartphone lineups are not competitive enough to challenge its main rivals.
Mobile phone sales dropped to 27.1 million from 34 million handsets sold in the fourth quarter and handset operating profit margins fell to 0.9 percent from 6.4 percent a year ago.
Sales of its handset division decreased by 20 percent at 3.14 trillion won from 3.90 trillion won year-on-year, LG said.
Analysts say the massive consumer migration towards smartphones in developed markets such as Europe and North America dampened LG's market share in the sector.
"LG has been on red alert in its mobile phone business in terms of profitability and growth. Without massive plans, it will fall under the hands of its rivals in the smartphone war," a high-ranking industry executive said. LG's share in the smartphone market was less than 1 percent.
"We are planning to boost second-quarter mobile phone shipments by a double digit percent from the first quarter and improve profitability with high-end models such as smartphones," Kim of LG said.
The company is planning to launch more phones that run on Google-backed Android mobile platforms in April and May, globally.
"LG's earnings will continue to improve this year. There have been concerns about its smartphone business. But LG could do better. The main risk to the company is growing competition," Soh Hyun-cheol, an analyst at Shinhan Investment, said.