LG Earnings Hit Hard by Its Poor Smartphone Sales | Be Korea-savvy

LG Earnings Hit Hard by Its Poor Smartphone Sales


LG Electronics Q2 net plunges on weak smartphone sales (image courtesy of LG Electronics)

LG Electronics Q2 net plunges on weak smartphone sales (image courtesy of LG Electronics)

SEOUL, July 29 (Korea Bizwire) – LG Electronics Inc., South Korea’s No. 2 tech giant, said Wednesday its second-quarter net profit tumbled 45 percent on-year due to lackluster sales of its flagship G4 smartphone and unfavorable currency rates.

Net profit came to 226.4 billion won (US$195.7 million) in the April-June period, compared with 411.8 billion won a year earlier, LG Electronics said in a regulatory filing.

Operating profit came to 244 billion won, also down 60 percent a year earlier, while sales shed 7.6 percent to 13.9 trillion won.

The operating profit hovered far below the median estimate of 344.2 billion won in a poll of 19 brokerages conducted by Yonhap Infomax, the financial news arm of Yonhap News Agency. The consensus sales had been estimated to come in at 15.1 trillion won.’ 

LG said its home entertainment business suffered an operating loss of 82.7 billion won due to dull demand for its TV products around the globe. The segment’s sales reached 3.93 trillion won, down 18 percent from a year earlier.

The mobile communications business, including smartphones, posted revenue of 3.6 trillion won, nearly flat from a year earlier. Its operating profit nosedived 99.7 percent on-year to 200 million won.

Shipments of smartphones came to 14.1 million units in the second quarter, down 3 percent from a year earlier. LG said it marked the first time for sales of long-term evolution (LTE) smartphones to hover above 8 million units in a single quarter.

“The profitability of the mobile segment, however, lost ground due to increased competition and more marketing expenses amid the release of the G4 smartphone,” it said.

While its sales in the North American market jumped 36 percent on-year on the back of robust sales of tablet PCs, its revenue in the South Korean market lost 29 percent on-year.

In the first half of this year, LG sold about 29.5 million units of smartphones, up 10 percent from a year earlier and a first-half record.

Looking ahead, LG said it will continue to expand its portfolio of high-end TVs and cut production costs.

With competition in the global smartphone market likely to get fiercer down the road, LG said it will seek to improve profitability by rolling out more budget phones and various editions of the flagship G4 smartphone to meet diverse consumer needs.

Samsung took up 26.8 percent of the world’s smartphone market in the April-June period, unchanged from the previous quarter’s reading, while Apple saw its share fall to 16.4 percent from 20.5 percent over the cited period, according to the data compiled by industry tracker TrendForce.

LG suffered a 0.3 percentage-point fall to 5.8 percent over the cited period.

TrendForce, however, said LG’s smartphone sales are anticipated to remain dull as “hardware improvements (of the G4 smartphone) are not as exciting to consumers compared with the upgrades made on its predecessor, the G3.”

LG added it will seek to find more revenue from the automobile industry.

The company has been making efforts to tap deeper into the vehicle components business. The segment, however, posted an operating loss of 1.5 billion won in the second quarter.

Shares of LG Electronics closed 1.74 percent lower at 43,800 won on the Seoul bourse, with the benchmark KOSPI edging down 0.07 percent. LG released its second-quarter earnings report after the market closed, though it used to announce quarterly earnings during the trading hours.

(Yonhap)

 

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