LG Elec.’s Q2 OP down 15.4% on sluggish TV, smartphone sales

2019.07.08 09:41:49 | 2019.07.08 09:42:43

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South Korea’s LG Electronics Inc. saw its operating profit drop 15.4 percent on year for the April-June period largely due to sluggish sales of smartphones and televisions, falling short of market expectations.

In a preliminary earnings report released on Friday, LG Electronics estimated its operating profit on a consolidated basis reached 652.2 billion won ($555 million) in the second quarter ended June, down 15.4 percent from the same period a year ago and 27.6 percent from the previous quarter. Sales inched up 4.1 percent on year and 4.8 percent on quarter to 15.6 trillion won.

Its sales came largely in line with the market consensus of 15.75 trillion won, but operating profit came far below the market expectation of 778.1 billion won estimated by Seoul-based financial data provider FnGuide.

The company’s final results, including earnings by business division and net income, will be confirmed later this month.

Shares of LG Electronics ended Friday closed 5.22 percent down at 72,600 won.

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LG Electronics’ poor results largely owed to the disappointing performance of its mainstay business home entertainment division that is responsible for television production and sale and money-losing mobile communications unit that manufactures and sell smartphones.

Analysts estimated that the company’s mobile communications division posted an operating loss of about 200 billion won in the second quarter, failing to reduce loss from the first quarter when it reported a loss of 203.5 billion won. LG Electronics’ first 5G smartphone – LG V50 ThinQ – raised decent sales but its mobile communications business extended loss in the April-June period due to rising marketing costs.

The company’s home entertainment division, which raised 346.5 billion won in operating income in the first quarter, is estimated to have seen its profit drop to the 200 billion won range due to sluggish TV demand and intensifying market competition from its arch-rival Samsung Electronics in the premium TV market and Chinese peers in the low-end and mid-range segments.

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Outlook for the company’s smartphone and TV business in the second half of this year is not bright, either.

Daishin Securities Co. analyzed that profitability of LG Electronics’ flagship organic light emitting diodes (OLED) televisions has deteriorated amid growing competition from Samsung Electronics Co.’s premium quantum-dot OLED (QLED) televisions and the ascent of Chinese rivals in the large liquid crystal display (LCD) television market. The brokerage projected that LG Electronics’ mobile communications division would continue to log loss for the rest of this year in an absence of signs for any immediate recovery in its smartphones sales.

In the first six months of this year, LG Electronics’ revenue totaled 30.5 trillion won, up 1.3 percent from the same period a year ago and operating profit 1.55 trillion won, down 17.4 percent during the same period.

By Hwang Soon-min and Lee Eun-joo

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