Baek Byung-yeul is a journalist at The Korea Times focused on cultural content, including films and cultural events in South Korea. You can contact him at baekby@koreatimes.co.kr to share your insights.
LG Electronics keeps earnings surprise streak alive
By Baek Byung-yeul
By Baek Byung-yeul
LG Electronics continued its strong performance during the April-June period thanks to soaring demand for home appliances and TVs.
According to the company's preliminary earnings guideline for the three-month period ended June 30, announced Wednesday, the company estimated its sales during the latest quarter came to 17.11 trillion won ($15 billion), up 48.4 percent, year-on-year. It also estimated its operating profit was at 1.11 trillion won, up 65.5 percent from a year earlier.
The sales figure marked an all-time high among the company's second-quarter performances. Also, it is the first time that LG's operating profit has exceeded 1 trillion won for two quarters in a row.
LG said performance of its mobile communications unit, which supervises its smartphone business, will be reported as discontinued operations in the second-quarter earnings as the company already abandoned the business.
LG will specify the breakdown of its divisional performance later this month. Analysts attributed LG's better-than-expected second-quarter performance to the solid sales of its traditional cash cows ― home appliances and TVs ― as the continued pandemic has been awakening idling demand for consumer gadgets in LG's target markets.
Its home appliance and air solutions business unit, which takes charge of the home appliance business, is expected to generate an operating profit of between 750 billion won and 780 billion won. This is slightly lower than the first quarter, when it logged over 900 billion won, likely due to the fact that the second quarter has traditionally been an offseason for IT companies.
Its home entertainment unit, which manages its television business, was expected to report a quarterly operating profit of between 250 billion won and 300 billion won. Despite TV makers struggles hit by the rise in prices for LCDs, which take up at least 40 percent of the price in a TV unit, LG is expected to have been benefited from its gradual shift toward OLED TVs.
“Despite the difficult business environment caused by rising LCD prices, an increase in OLED TV sales helped LG report visible profitability. LG is estimated to have sold 943,000 OLED TVs during the latest quarter, up 198 percent year-on-year, and the accumulated amount of OLED TV sales for the first six months of this year also increased by 154 percent, year-on-year,” said Roh Kyoung-tak, an analyst at Eugene Investment & Securities.
Regarding the outlook for the company's vehicle components business, on which the company is heavily betting, it's been expected the division was able to reduce its operating loss to 70 billion won in the second quarter powered by the recovery in demand for new cars. LG launched LG Magna e-Powertrain, a joint venture with collaboration of the Canadian auto parts maker Magna International, on July 1. It owns a 51 percent stake in it.