LG Electronics expects 11% drop in Q1 operating profit despite sales growth

LG Electronics' headquarters in Yeouido, western Seoul [YONHAP]

LG Electronics forecasts an 11 percent on-year decrease in operating profit for the first quarter, but also expects the best first quarter result for its revenue.

In a preliminary earnings report released on Friday, the Korean electronics maker expects to post an operating profit of 1.33 trillion won ($983 million), still above the market consensus of 1.29 trillion won compiled by market tracker FnGuide.

The company projects a quarterly revenue of 21.1 trillion won, up 3.3 percent on year. This figure falls short of analysts’ expectations of 21.25 trillion won.

The preliminary forecast does not include detailed breakdowns, but the company said that it anticipates strong sales from the business-to-business (B2B) deals and new subscription models that the electronics maker is introducing to its home appliances.

“The implementation of innovative business models such as subscriptions, along with the expansion of business-to-business operations, have proven to be crucial in overcoming challenges like the delayed recovery of market demand,” LG said in a statement.

“We plan to accelerate the paradigm shift in home appliance lifestyle by introducing subscription services that allow customers to choose appliances and related services that suit their lifestyles.”

Its business-to-business (B2B) segment, including heating, ventilation and air conditioning (HVAC) equipment and built-in appliances, is also experiencing growth.

For its vehicle solutions business, the company expects its order backlog to exceed 100 trillion by the next quarter.

In the business solutions sector, the company aims to focus on commercial displays and investment in future growth engines such as robots and electric vehicle charging.

LG Magna e-Powertrain, LG Electronics’ joint venture with Canada’s Magna International to co-develop electric powertrains, is expected to secure additional orders from the European and Asian markets.

Final earnings will be released at the end of this month.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]