LG Electronics Q2 profit jumps 140%
Electronics dealers look at an LG Electronics Signature brand premium home appliance during a launching event in Cancun, Mexico, Thursday local time. / Courtesy of LG Electronics
By Kim Yoo-chul
LG Electronics’ second-quarter operating profit more than doubled from a year ago on brisk sales of its home appliances and reduced operating losses in its mobile business.
On Friday, LG Electronics said it posted a 584.6 billion won operating profit during the second quarter, up 139.5 percent year-on-year.
Quarterly sales were 14 trillion won, up 0.5 percent during the period. On a quarterly basis, the company saw a 15.7 percent rise in operating profit, while sales were up 4.8 percent from the previous quarter.
LG announced its second-quarter performance on a consolidated basis, including the company’s overseas performance.
LG will announce divisional performance for the latest quarter in the last week of July, the company said.
Friday’s preliminary earnings guidance announced by LG means that the company reached a two-year high on improved profits and solid demand for home appliances.
But more importantly, according to LG officials, its mobile business reduced operating losses for the latest quarter on expense controls and reduced fixed costs.
Its second-quarter earnings guidance was in line with earlier market consensus as LG Electronics was expected to have 14.42 trillion won in sales for the quarter, while its quarterly operating profit was expected to be 594 billion won.
“Our home appliances business performed very well as demand for high-end appliance products such as TVs remained strong in LG’s target markets,” said a spokesman at the company, adding the coming summer Olympics in Brazil have lifted demand for its home appliances.
“LG’s TV business is expected to generate between 220 billion won and 230 billion won in operating profit for the latest quarter, while its home appliances business division is seen to report a 500 billion won operating profit,” said a senior fund manager at a Europe-based investment bank.
The LG spokesman declined to specify the amount of reduced operating losses at its mobile division.
But market analysts and investment banks say the operating losses at its handset business have been halved during the second quarter from the previous quarter.
“The operating losses at LG’s mobile business during the April-June period were expected to be below 100 billion won after the unit reported 200.2 billion won operating losses in the first quarter. This is due to LG’s latest moves to scale down its mobile business,” said the manager.
“LG’s painful cost-cutting efforts at its mobile division will help it trim losses in the latter half of this year. Also, the decision by the United States to ban an import of Huawei-manufactured telecommunications equipment will cut the sale of Huawei phones in the United States. This will also be an additional plus factor for LG,” Shinhan Financial senior analyst So Hyun-chul said in a report to clients.