South Korea’s tech giant LG Electronics Inc. said its operation profit in the second quarter dwindled 30.4 percent from the stellar record in the first quarter due to struggling smartphone division despite heavy marketing expenditure.
According to its earnings guidance for the quarter ended in June published on Friday, the household white good producer registered 771 billion won ($690.4 million) in operating income, up 16.1 percent from a year-ago period.
Sales rose 3.2 percent to 15.02 trillion won in the April-June period from a year ago but 0.7 percent down from the previous quarter.
Both bottom and top line fell short of expectations.
Thanks to strong first-quarter performance, the company managed to report best-ever results - income of 1.88 trillion won - for the full first six-month period.
Shares of LG Electronics ended down 2.7 percent at 75,700 won on Friday.
LG Electronics did not offer a breakdown of businesses in its preliminary results but its home entertainment (HE) division that has been putting organic light emitting diodes (OLED) TVs up front and high-end home appliance and air solution (H&A) division are estimated to have stayed lucrative.
LG Electronics HE (TV) division that reported a surprising operating margin of 14 percent in the first quarter is estimated to have kept up a double-digit operating margin in the April-June period. The company’s H&A division is also likely to have reached 10 percent margin during the same period.
But smartphone division lingered as its pain point despite heavy spending on both marketing and innovation.
LG Electronics’ mobile device division has been in the red since the second quarter of last year.
Industry sources noted that LG Electronics will do fairly well in the second half of this year thanks to an increase in shipments of OLED TV and growing demand for 65-inch or larger TVs that boost profitability. Demand for premium white goods such as washing machines and refrigerators remain robust.
The company’s manufacturing facility in Tennessee, the United States, that will begin operations in October, will also resolve concerns over U.S. government’s use of safeguard tariffs.
By Lee Jae-cheol and Lee Eun-joo
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