LG Electronics sees operating profit drop

By Kim Yoo-chul

Staff reporter

LG Electronics said Wednesday its earnings will see a gradual recovery from the third quarter on the back of rising demand for consumer electronics amid good seasonality.

"We expect a better third quarter. Panel prices for televisions are to be stabilized, while the lineups of premium products such as LED-backlit LCD TVs will strengthen," LG said in a statement.

LG said more upcoming smartphone models will help it bolster deteriorating profits. The demand for white-goods such as fridges is expected to back up LG's overall performances.

"Market focus has already been shifted over the growth pace in terms of earnings from the third quarter. Although we haven't seen a big plunge in stock prices, its smartphone business will remain in the red in the third quarter," said Baek Jong-seok, an analyst at Hyundai Securities.

LG reported an "earnings shock" in the second quarter.

Operating profit during the April-June period tumbled by 90 percent to 126.2 billion won year-on-year, while the quarterly net profit dropped by 33 percent to 856.4 billion won. Sales were at 14.4 trillion won.

The numbers are based on a consolidated basis, an international accounting measurement that includes the performances of LG's all overseas units.

The operating profit of its TV business plummeted by 90 percent to 28.1 billion won a year earlier as the won's appreciation against the euro wiped out export earnings at the division. Its mobile phone business turned to the red for the first time in four years.

"LG's operating loss at its mobile division was expected. But 120 billion won in the quarter was too much. LG doesn't have an answer to compete with Samsung’s Galaxy S and Apple’s iPhones, making the outlook uncertain," said Jang Yoon-su, an analyst at Korea Investment.

"The home appliance division was impressive but that’s not enough," according to the analyst.

Shares of LG lost 2.88 percent to end at 101,000 won on the nation's main bourse, the bourse operator Korea Exchange said.