LG Electronics reports record quarterly profit

Industry

Published: 07 Apr. 2021, 19:20 Updated: 07 Apr. 2021, 19:52

LG Electronics reports record quarterly profit

LG Electronics' OLED TVs [LG ELECTRONICS]

LG Electronics expects to report record profit and revenue in the first quarter as home appliances sold well.

The result comes just months ahead of the company shuttering of its money-losing mobile phone business, which could further lift profits.

In guidance released Wednesday, the electronics maker reported 1.51 trillion won ($1.35 billion) in operating profit, up 39.2 percent on year. The latest record breaks the previous record profit of 1.2 trillion won in the second quarter of 2009.

The number beat the market estimate of 1.2 trillion won, which was compiled by FnGuide.

Sales came in at 18.8 trillion won, up 27.7 percent and also a record high, as demand for home appliances and TVs was strong with the easing of pandemic worries and with the hope for a recovery building.

Analysts observed that the upsurge in demand took place in North America and Europe, particularly for high-end televisions, as some shoppers were splurging after being cooped up during long lockdowns, a phenomenon known as "revenge spending."

"We attribute the robust outlook to the shift in spending patterns in North America and Europe as consumers engage in 'revenge spending' and splurged on premium consumer electronics, including ultra-large TVs," said Jeff Kim, an analyst at KB Securities. The analyst forecast LG Electronics will generate 1.5 trillion won in net profit in line with the company's guidance.

LG is betting big on its premium organic light-emitting display (OLED) TVs by slashing retail prices of the range. Other appliances, including air purifiers, air conditioners and clothing steamers, also sold well.

"The Home appliance division is expected to enjoy growth of over 10 percent in sales and operating profit, driven by premium products such as steamers," said Kim Joon-hwan, an analyst at Hanwha Securities.

"Its television business will continue to do well due to booming sales online, though its profit will likely decline because of the rising panel prices," Kim expected.

The struggling mobile phone business is estimated to have generated losses of approximately 200 billion won in the first three months of the year, its losing streak now running 24 consecutive quarter.

The market is closely tracking how the discontinuation of LG's money-losing phone business could benefit the tech company in terms of financial performance. The business will be excluded from its quarterly statements starting from the second quarters.

Kim from Hanwha Securities projected that the exclusion could relieve LG Electronics of 840 billion won of annual losses, which could further boost the company's profitability for the rest of the year.

The shares of LG Electronics edged down 0.94 percent to close 158,500 won on Wednesday.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]