LG Electronics posts strong profits on TV, home tech sales

LG Electronics reported on Thursday that its operating profit for the second quarter soared 16.1 percent over the same period last year to 771 billion won ($689 million).

The company’s revenue also grew by 3.2 percent to 15.19 trillion won on the back of record earnings from TVs and other home electronics products.

LG’s revenue of 30.14 trillion won and operating profit of 1.88 trillion won in the first half were the largest ever for the country’s second-largest electronics producer, after Samsung Electronics. It was the first time that LG’s revenue for the first six months of the year surpassed 30 trillion won.

Two divisions - home appliance and air solution and home entertainment - were the biggest contributors to the record quarterly performance.

However, LG’s mobile communications division, which is responsible for smartphones, and vehicle components division posted combined operating loss of around 22 billion won.

Robust sales of air conditioners, clothes dryers and Styler clothes steamers in the April-June period led to 4.4 percent on-year growth in revenue in the home appliance and air solution division, which grew to 5.26 trillion won. The division’s second-quarter operating profit hit 457.2 billion won, up 1.7 percent year on year, making 59.3 percent of the company’s profits.

The home entertainment division’s revenue also grew by 4.1 percent on year to 3.82 trillion won, largely due to the increased sale of its premium products, including pricey OLED TVs.

Revenue for the mobile communications division was 2.72 trillion won, but operating loss amounted to 185.4 billion won.

LG cited stagnant growth in the global smartphone market, reduced sales of its medium and low-priced smartphones in South America and increased marketing expenses for its recently-launched flagship models as the reason for the loss.

Once the world’s fourth-largest smartphone producer after Samsung, Apple and Huawei, LG is now out of the top five manufacturers. The company is hoping that the recently-released G7 ThinQ and V35 ThinQ flagship smartphones create a turnaround, but that scenario isn’t very likely.

“Competition in the premium smartphone market is expected to intensify due to stagnant smartphone demand and rivals launching new products,” the company said in its earnings report.

“LG’s mobile communications division needs to make its price structure more efficient and increase sales volume, but it won’t be easy, as the global smartphone market has entered the maturation stage,” said Ko Eui-young, an analyst at Hi Investment and Securities.

Revenue for the vehicle components division advanced 3.9 percent year-on-year to 872.8 billion won, due to LG’s commercialization of new infotainment products and electric vehicle components.

But the division posted 32.5 billion won in operating loss due to rising prices for components such as memory and multilayer ceramic chip capacitors and costs incurred for new projects.

The division has been touted as LG’s next growth driver, but its performance so far has been sluggish.

“We have been striving to achieve 1 trillion won in revenue and a turnaround in the latter half, but we expect that these goals will be delayed,” said LG in a conference call on Thursday. “New projects have been postponed due to uncertainties in China.”

BY SEO JI-EUN [seo.jieun@joongang.co.kr]