LG Electronics Q3 net tumbles due to rising logistics costs

LG Electronics' flag is seen at the company's office in Yeouido, Seoul, July 7, 2023. Newsis

LG Electronics said Thursday its third-quarter net profit tumbled 81.4 percent from a year earlier due to rising logistics costs.

Its net income for the July-September period reached 90.2 billion won ($65.35 million), compared with a net profit of 4.85 trillion won from the same period last year, according to the company in a regulatory filing.

Operating profit also fell 20.9 percent on-year to 751.9 billion won from 950.1 billion won, while sales rose 10.7 percent to 22.17 trillion won, marking the largest amount for a third quarter.

The operating profit was 22.4 percent lower than the average estimate, according to a survey by Yonhap Infomax, the financial data firm of Yonhap News Agency.

LG Electronics said its new strategy to focus on business-to-business operations helped the company see its quarterly sales expand for four straight quarters.

But the weak quarterly bottom line is attributable to a hike in global maritime logistics costs stemming from geopolitical conflicts in the Middle East and increased U.S. tariffs on China.

The company's conventional home appliances business was steady in the three-month period ending in September.

It posted 8.3 trillion won in sales, up 11.7 percent from a year ago, and 527.2 billion won in operating profit, up 5.5 percent.

LG Electronics' TV division reported 3.7 trillion won in sales and 49.4 billion won in operating profit for the third quarter.

The vehicle component solutions business, one of LG Electronics' new flagship businesses, saw its sales reach 2.6 trillion won and operating profit total 1.1 billion won.

Its business solution division's sales rose to 1.4 trillion won, with an operating loss of 76.9 trillion won.

LG Electronics expects its earnings to gradually recover in the fourth quarter, driven by potential interest rate cuts, though concerns over geopolitical risks and uncertainty surrounding the U.S. presidential election remain.

To meet growing demand in emerging markets, the company plans to diversify its home appliance lineup and expand its new business offerings, including subscription services.

With the global TV market projected to see modest growth in the fourth quarter, primarily driven by entry-level products, LG Electronics will continue to respond flexibly to customer needs and boost growth by expanding its webOS partnerships, the company said.

Despite the sluggish demand for electric vehicles, LG Electronics will intensify efforts to strengthen its market presence and enhance profitability, it added. (Yonhap)