LG's smartphone sales soaring
By Kim Yoo-chul
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Koo Bon-joon LG Electronics CEO
LG Electronics is no longer an underdog in the smartphone sector.
The firm announced Wednesday it posted 15.23 trillion won in revenue during the April-June period, up 10 percent year-on-year. Operating profit declined 9 percent to 479 billion won, while net profit was 156 billion won, down 8 percent, from a year earlier.
Operating profit and net profit declined from the previous quarter hit by low demand and increased competition.
But LG is still buoyant because its smartphones are yielding tangible results powered by increased awareness of its flagship mobiles from developed to emerging markets.
The firm’s shares rose by 2.34 percent to end at 74,200 won Wednesday.
In a statement, LG said it shipped 12.1 million smartphones in the second quarter ― a quarterly record. Shipment increased by 17 percent from the first quarter and more than doubled year-on-year.
It shipped a total of 17.8 million phones including budget ones during the latest quarter. Smartphones took up 68 percent out of the total shipments, a LG spokesman said.
“It’s no big doubt that LG’s smartphone business is improving in profit. Simply put, we are making money from smartphones. By launching ‘LG G2’ and L and F-Series smartphones, LG is trying to approach international markets with two-tracks,” said the spokesman.
He stressed profitability and growths are the top priorities for its mobile business throughout this year.
LG has high hopes of its upcoming premium handset G2 model, which will be introduced on Aug. 7 in New York. It aims to narrow the gap with market leaders Samsung and Apple.
The G2 model will include a full high-definition screen and connection speed up to twice faster than conventional fourth-generation networks.
Its mobile communications division, led by President Park Jong-seok, reported 3.12 trillion won in revenue for the second quarter, while the division posted 61.2 billion won in operating profit ― a big turnaround from the 27.9 billion won loss a year earlier.
The spokesman said LG will invest more to sharpen its competiveness in viewing quality, creating user-friendly interface, appealing surface design and supporting the high-speed networks such as LTE-A.
“We acknowledge LG Electronics’ strong recovery in handsets and the company’s handset recovery is promising for the short-term,” said Mark Newman, a senior analyst at Sanford C. Bernstein in Hong Kong, in a note to clients.
With increases in smartphones, its other products such as TVs and home appliances fared well. While its TV business was slightly lower than expectations, LG’s appliances and solution units remained stable.
Thanks to the rising demand in emerging markets including India and South America, its TV business increased its profit margin to 1.9 percent from 0.7 percent. Revenue during the quarter was 5.50 trillion won, while the operating profit was 106 billion won, according to the statement.
The home appliances division, which produces goods for household usage, was proud to create record quarterly revenue since the division was launched in 2009.
Its revenue was 3.18 trillion won. Operating profit came to 121 billion won as the division benefited from cost-cutting and good sales from developed to emerging markets ahead of the summer season.
Air-conditioning and energy solution division also reported a record revenue during the quarter. Its operating profit margin was 9.9 percent.
LG admitted that it was facing tough competition in the current quarter because of sluggish demand for TVs and premium smartphones is dampening profitability.
But the company plans to overtake its rivals by releasing products with cutting edge technological advantages. It also believes its brand image has improved to better compete with Samsung and Apple.
“LG Electronics will remain as the stable No. 2 in smartphones as LG has affiliates that were vertically-integrated. With helps by LG Innotek, LG Chem and LG Display, LG Electronics could effectively push its smartphone business. It’s impossible for Nokia and the BlackBerry maker Research In Motion to come back into the markets,” said Park Won-jae, an analyst at KDB Daewoo Securities.