LG Electronics estimates Q2 operating earnings down 12% on weaker demand
A man passes by the LG logo in front of the company's headquarters in Yeouido, western Seoul, July 8. Yonhap
LG Electronics on Thursday estimated its second-quarter operating profit decreased 12 percent year-over-year on weaker demand for home appliances amid rising inflation and raw material costs.
Its earnings guidance for the April-June period showed the tech company's operating profit declined 12 percent from a year ago to 791.7 billion won ($610.5 million).
The operating profit was 1.2 percent lower than the average estimate, according to the survey by Yonhap Infomax, the financial data firm of Yonhap News Agency.
Sales increased 15 percent to 19.47 trillion won. The data for net income was not available.
Analysts have suggested less upbeat earnings for LG for the remaining year, as pandemic-driven pent-up demand for TV has lost steam and rate increases in major economies to control inflation weakened consumer spending power.
Also high shipping costs amid supply chain disruptions are hurting the company's bottom line.
One silver lining is that LG's electric vehicle (EV) components business has improved performance on growing demand.
Earlier this week, LG said it secured 8 trillion won ($6.1 billion) worth of new orders for electric vehicle (EV) parts and solutions in the first half, a sign that its new growth engine is gaining ground.
Analysts estimated LG's vehicle solutions business, with customers that include Mercedes-Benz AG and General Motors, swung to a net profit in the second quarter.
The company expected its accumulated order backlog to top 65 trillion won by the end of the year, up 8 percent from a year ago.
Sales of the EV components jumped 24 percent last year from a year ago, despite a drop in car production amid the global chip shortage.
Analyst Kim Dong-won with KB Securities estimated the division logged 40.6 billion won in operating profit in the second quarter, turning a profit for the first time since LG entered the market in 2013, except for the fourth quarter of 2015.
Kim attributed the rosy prospects to "improved profitability and growing orders from global automakers after the company supplied in-vehicle infotainment solutions to Mercedes-Benz all-electric EQS sedan amid the gradual easing of the auto chip shortage and a subsequent rise in auto production."
The company will announce its Q2 earnings results July 28. (Yonhap)