LG Electronics’ earnings backpedal in Q3

An LG flag waves at the company's headquarters in Yeouido, Seoul, in this July 7, 2023, file photo. Newsis

LG Electronics on Monday announced its third-quarter earnings guidance, which backpedaled from a year earlier, as the company faced mounting tariff pressure from the United States and intensifying competition in low-end home appliances.

According to the electronics giant, its consolidated sales for the third quarter stood at 21.88 trillion won ($15.8 billion). It grew 5.5 percent from the previous quarter but slid 1.4 percent from a year earlier.

During the same period, operating profit reached 688.9 billion won, up 7.7 percent from a quarter earlier but down 8.4 percent year-on-year. The second quarter is typically considered a seasonal off-peak period for the home appliance industry.

The company attributed the earnings slowdown to one-off causes including the growing tariff burden stemming from rapid changes in the global trade environment. It also noted that a voluntary redundancy program across its TV division has also affected its overall profitability.

Despite these pressures, LG Electronics said its third-quarter earnings came in about 10 percent above market consensus. The company said its home appliance division maintained solid competitiveness and market leadership, while the vehicle component solutions business is expected to have achieved record-high profitability.

In its home appliance business, the company said that despite the continued tariff burden on exports to the United States and a delayed recovery in global demand, it has maintained its dominance in the premium market based on industry-leading competitiveness.

In the media and entertainment business, the company saw one-off costs related to a voluntary retirement program carried out as part of workforce restructuring. It also saw an increase in marketing expenses due to intensified competition in TV sales.

The company said it expects record-high profitability in its auto parts business, driven by the expansion of in-vehicle infotainment sales. It added that it is diversifying its auto parts business model toward content platforms while maintaining a robust order backlog.

Regarding its heating, ventilation and air conditioning business, LG Electronics said it will expedite efforts to secure future growth opportunities through its commercial air conditioning and chiller solutions. The company added that large-scale orders, including artificial intelligence (AI) data center cooling solutions, have been steadily increasing in markets such as North America, Latin America, the Middle East and Asia, and it plans to use these as references to further expand the business’s potential.

The company also said the upcoming listing of its Indian unit will help strengthen its business fundamentals and accelerate future growth.

Meanwhile, its battery-making affiliate LG Energy Solution also announced its third-quarter earnings guidance on Monday, posting 5.7 trillion won in consolidated sales and 601.3 billion won in operating profit. Sales fell 17.1 percent from a year earlier, while operating profit rose 34.1 percent year-on-year.

LG Electronics will reveal a breakdown of its performance during its third-quarter earnings call slated for later this month. LG Energy Solution plans to hold its earnings call on Oct. 30.