This photo, taken on April 7, 2020, shows the outdoor signage of LG Electronics Inc. at the company’s headquarters in Seoul. (Yonhap)
SEOUL, Jan. 8 (Korea Bizwire) – LG Electronics Inc. on Friday forecast robust fourth-quarter earnings as sales from its mainstay home appliances apparently remained solid despite the weakness of the U.S. dollar.
In its earnings guidance, the South Korean tech giant estimated its operating profit at 647 billion won (US$592 million) for the October-December period in 2020, a sixfold increase from a year ago.
Its fourth-quarter operating income estimate was lower than the market consensus of 689 billion won in a survey by Yonhap Infomax, the financial arm of Yonhap News Agency. However, it was still the largest-ever for a fourth quarter.
LG projected its fourth-quarter sales at a record high of 18.7 trillion won in the last three months of 2020, up 16.9 percent from a year earlier. The figure was slightly above the market forecast of 18.1 trillion won.
On a quarter-on-quarter basis, LG’s fourth-quarter sales estimate was up 11 percent from the previous quarter, when it racked up 16.9 trillion won. Operating profit, however, was down 32.5 percent compared to the third quarter.
For the whole of 2020, LG expected its operating profit to reach 3.19 trillion won, up 31 percent from a year earlier, with its sales to climb 1.5 percent on-year to 63.26 trillion won.
Both yearly sales and operating profit will be all-time highs if the estimated figures are confirmed later.
LG did not break down performances of its respective business divisions, saying it will announce the detailed earnings later this month.
Despite the weak U.S. dollar and lockdowns in European nations over the resurgence of COVID-19, analysts assessed that LG’s profitability remained healthy in the fourth quarter.
“Expanded online sales from its home appliance and TV business units are expected to help improve the company’s profitability,” said Kim Rok-ho, an analyst at Hana Financial Investment.
“It also appeared to have tight inventory controls compared with last year and reduced costs.”
This photo provided by LG Electronics Inc. on Oct. 27, 2020, shows the company’s OLED TVs displayed at a store in Australia.
LG’s home appliance and air solution (H&A) business unit is again expected to have anchored the company’s performance. Analysts estimated that LG’s H&A division logged around 400 billion won in operating profit in the fourth quarter.
“Sales of its home appliances, including vacuum cleaners and air purifiers, are again on rise, and its cost management seems to be going well,” said Kwon Sung-ryul, an analyst at DB Financial Investment.
“We expect its operating margin at around 6 percent in the fourth quarter.”
Analysts estimated the operating profit of LG’s TV business, managed by its home entertainment (HE) division, to be around 200 billion won in the fourth quarter, with increased OLED TV sales.
LG’s struggling mobile and vehicle component solutions (VS) business divisions were projected to remain in the red in the fourth quarter.
Analysts predicted that LG will have record earnings in 2021 as they expect the company’s home appliance and TV businesses to remain strong, with its mobile unit reducing operating losses.
Its vehicle component solutions business was expected to swing to the black in 2021.
“Demand for premium home appliances and TVs is creating new growth momentum,” said Roh Kyoung-tak, an analyst at Eugene Investment & Securities.
“Its smartphone business will try to improve cost competitiveness and increase budget phone sales in North and South America.”
Shares in LG Electronics dropped 1.67 percent to 147,500 won, underperforming the broader KOSPI’s 3.97 percent increase. LG reported its fourth-quarter earnings guidance before the market’s close.
(Yonhap)
