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LG Electronics to post stellar second quarter as demand surges

Published: 07 Jul. 2023, 15:13 Updated: 07 Jul. 2023, 17:44

LG Electronics introduces its rebranded logo at electronic displays in the neighborhood near Hongik University in western Seoul, on May 10. [YONHAP]

LG Electronics predicted a 12.7 percent on-year increase in operating profit to 892.7 billion won in the second quarter, on the back of strong demand for premium consumer products and automotive parts, the company said in its preliminary earnings guidance released Friday.

The figure was below the analyst consensus of 977.9 billion won compiled by FnGuide.

LG Electronics' quarterly revenue came at 20 trillion won up 2.7 percent on year, above analysts’ expectations of 19.7 trillion won.

Neither segmentation nor net profit was included in the guidance.

LG Electronics explained in an electronics disclosure that home appliance sales from air conditioners and dehumidifiers rose amid heat waves and the rainy season.

Its automotive solutions business is becoming a reliable growth engine, with the division seeing a profit for the first time in the second quarter of 2022, turning its fortunes around after 26 consecutive quarters of posting operating losses.

The unit has an order backlog of 80 trillion won as of April this year, the company added.

“Sales from its primary business units, such as home appliances and TV, will likely improve from the third quarter this year after inventory adjustments are made by then, which means demand and supply will become balanced,” Korea Investment & Securities analyst Cho Chul-hee said.

“Sales from these units will surge as demand from developed countries, which are LG's primary exports, increases. The company shows competitiveness in its businesses with stable earnings compared to other market players, and the automotive business is also proving to be a long-term growth factor.”

Analyst Park Kang-ho at Daeshin Securities also predicted automotive parts will contribute to LG’s overall profit increase, with LG Magna e-Powertrain also expected to be profitable from the fourth quarter onwards. LG Magna e-Powertrain is a joint venture formed between the company and Canada-based Magna to spur its electric vehicle (EV) powertrain business.

The electronics company’s estimated operating profit surpassed that of Samsung Electronics for the second consecutive quarter, with the latter posting its worst quarterly operating profit in 14 years at 600 billion won amid sluggish chip demand.

BY LEE JAE-LIM [[email protected]]