LG Electronics reports earnings shock as investments sour

LG Electronics' organic light-emitting diode(OLED) displays are installed during the CES 2023.

LG Electronics reported a net loss of 212.4 billion won ($172 million) in the final quarter of last year amid plunging demand for electronic devices — especially TVs — and rising costs.

The loss is a dramatic swing from the 21.3 billion won net profit in the year-earlier period and was the result of equity accounting losses related to the fall in stock prices of companies in which it is invested and the lower profitability of its own businesses.

The company's operating profit slid 90.7 percent to 69.3 billion won during the September-to-December period. Quarterly sales inched up 3.2 percent to 21.9 trillion won.

Full year, net profit rose 31.7 percent to 1.9 trillion won, while operating profit fell 12.5 percent to 4.1 trillion won. Sales hit a record high of 83.5 trillion won last year, up 12.9 percent over a year ago.

The television business was particularly weak during the quarter, squeezed by lower sales and lower prices of liquid crystal display (LCD) televisions.

The Home Entertainment division, which deals in TVs, reported annual sales of 15.7 trillion won and 5.4 billion won in operating profit last year. Sales are down 8.7 percent, and operating profit fell 99.5 percent.

To solidify its profit, the appliance maker will continue its focus on premium TV lines based on organic light emitting diode (OLED) panels.

Its Home Appliance & Air Solution, which covers virtually all appliances except for TVs, posted 29.9 trillion won in sales and 1.1 trillion won in operating profit. Sales are up 10.3 percent, and operating profit fell 48.9 percent.

The Vehicle Solutions division for automotive parts recorded 8.6 trillion won of sales and 169.6 billion won in operating profit. The profit marks the first full-year profit since 2015 for the relatively young business division.

Since the market conditions will likely remain uncertain through 2023 due to weakening consumer sentiment, LG Electronics will focus on reducing costs across the board.

The company said in a conference call that it has successfully negotiated lower logistics fees with shipping companies, which will allow for “significant cost-saving.”

The savings will start to be reflected in the first quarter.

As for concerns about rising inventory levels, the company said that its current inventory level “has returned to normal.”

It estimated next year’s capital expenditure to come in the mid-2-trillion-won range, which is in line with last year’s spending.

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