This photo provided by LG Electronics Inc. on Feb. 26, 2021, shows the company’s home appliance products displayed at its premium store in Panama City, Panama.
SEOUL, April 3 (Korea Bizwire) – LG Electronics Inc. is expected to post its best-ever first-quarter earnings, according to analysts, on the back of robust performance by its home appliance and TV businesses amid the pandemic-driven stay-at-home economy.
The South Korean tech powerhouse was projected to log 17.8 trillion won (US$15.7 billion) in sales in the January-March period, up 21.2 percent from a year earlier, while operating profit was estimated to jump 15.9 percent on-year to 1.26 trillion won over the period, according to the data from seven local brokerage houses compiled by Yonhap Infomax, the financial news arm of Yonhap News Agency.
Should estimated figures stand, LG will have its best first-quarter performance in its history, beating the first three months of 2018 when it had 15.1 trillion won in sales and 1.1 trillion won in operating profit.
Compared to the previous quarter, LG’s operating profit was expected to surge 94.4 percent, while sales were projected to go down 4.9 percent.
LG will announce its first quarter earnings guidance next week.
Analysts said that LG’s cash cow, the Home Appliance and Air Solution (H&A) unit, stayed strong throughout the quarter with pent-up demand leading sales of its premium products.
The H&A business was projected to log around 900 billion won in operating profit.
“We expect the H&A unit to have more than 10 percent improvement in both sales and operating profit from a year earlier thanks to robust demand for premium home appliances,” said Kim Joon-hwan, an analyst at Hanwha Investment & Securities.
This photo provided by LG Electronics Inc. on March 28, 2021, shows the company’s OLED evo TV.
LG’s Home Entertainment (HE) unit, which manages the TV business, also saw upbeat performance in the first quarter despite a rise in display panel prices, according to analysts. They estimated the HE division to post around 350 billion won in operating profit.
“We believe revenues from the HE unit will increase about 32.9 percent from a year earlier due to strong sales in North America and Europe,” said Cho Chul-hee, an analyst at Korea Investment & Securities.
“Despite an increase in panel prices, the portion of highly profitable OLED TVs has also expanded, so its operating margin is likely to be about 9 percent.”
Analysts said both LG’s mobile and vehicle components businesses remained in the red in the first quarter, although the latter probably narrowed its operating loss.
“Despite chip shortage issues, LG’s vehicle components business is expected to have sharply decreased its losses in the first quarter with a strong 43 percent year-on-year sales increase, thanks to the expansion of electric vehicle parts supply, launch of a new infotainment project and performance of its affiliate ZKW,” said Kim Ji-san, an analyst at Kiwoom Securities.
This photo taken on Oct. 6, 2020, shows LG Electronics Inc.’s dual-screen smartphone, the Wing, displayed at a store in Seoul. (Yonhap)
Analysts said that operating losses from LG’s mobile communications (MC) unit have widened in the first quarter, fueling speculation about the company’s exit from the handset business.
They predicted the operating loss from the MC division in the first quarter to be around 280 billion won.
“Its smartphone shipments are expected to be flat from a year ago, and the average selling price (ASP) of its mobile products appeared to have dropped sharply,” said Kim Un-ho, an analyst at IBK Investment & Securities.
In January, LG said its money-losing MC division is open to every possibility for its future operations, with many suggesting that the company will either shut down or sell its mobile business, or at least scale it back.
Analysts said LG’s future performance depends on how the company copes with rising raw material and semiconductor prices as well as shipping costs, but it will ultimately come down to its decision on the mobile unit.
LG is widely expected to decide the fate of the troubled mobile business next week at a board meeting.
“Reconstruction of the mobile unit will significantly impact LG’s earnings and its share value,” said Kim Dong-won, an analyst at KB Securities.
“If there are no losses coming from the mobile unit, LG’s operating profit forecast can be raised from 3.8 trillion won to 4.8 trillion won this year.”
(Yonhap)
