LG Electronics Posts Record Q4 Earnings on Robust Home Appliance Sales

SEOUL, Jan. 29 (Korea Bizwire) – LG Electronics Inc. on Friday said it posted record earnings in the fourth quarter of 2020 on robust home appliance sales.

The South Korean tech giant said it logged a net profit of 262.3 billion won (US$233 million) in the October-December period, swinging from a net loss of 849.8 billion won a year ago.

The company’s operating profit rose nearly sixfold to 650.2 billion won in the last three months of 2020, its largest ever for a fourth quarter.

Sales rose 16.9 percent on-year to 18.7 trillion won in the fourth quarter, which was the company’s best-ever quarterly performance.

For the whole of 2020, LG Electronics posted a tenfold increase in its net profit to 2 trillion won. Operating profit surged 31.1 percent on-year to 3.2 trillion won, while sales inched up 1.5 percent on-year to 63.2 trillion won.

Both sales and operating profit were new highs in the company’s history.

LG’s record-setting performance was anchored by its home appliance & air solution (H&A) unit.

The H&A unit logged sales of 5.54 trillion won, up 20 percent from a year ago, while operating profit more than doubled to 299.6 billion won in the October-December period, both largest for a fourth quarter.

LG said double-digit sales growth in South Korea, North America and Europe, as well as its improved costs management, pushed up the bottom line of its main business.

Its H&A unit also posted record yearly performance with sales of 22.27 trillion won and operating profit of 2.35 trillion won in 2020. It also marked a two-digit operating margin for the first time at 10.6 percent.

LG expected home appliance demand to grow in 2021, especially for premium products.

“We have found that demand has grown for large-sized products in both advanced and emerging markets,” it said. “Demand for products with high-tech and advanced hygiene features is expected to grow.”

LG’s home entertainment unit, which manages the TV business, logged fourth-quarter sales of 4.28 trillion won, up 7.9 percent from a year ago. Operating profit jumped 103.5 percent on-year to 204.5 billion won.

LG said the 2021 TV market is expected to grow slightly, though demand is likely to go down in the second half of the year if the coronavirus situation gets stabilized with vaccinations.

Both mobile communications (MC) and vehicle component solutions (VS) units stayed in the red but managed to trim their operating losses from a year ago.

LG’s mobile business unit logged 248.5 billion in operating loss in the fourth quarter, improving from a loss of 332.2 billion won a year earlier. The unit’s sales increased 4.9 percent on-year to 1.38 trillion won.

For the whole 2020, its operating loss totaled 841.2 billion won, which reflected increased marketing costs to support its flagship devices.

LG’s mobile business has been in the red since the second quarter of 2015. With its accumulated operating loss reaching nearly 5 trillion won, LG has said it will closely review the direction of its business.

“Our mobile-related technology is not only an important asset to handsets, but also to smart appliances and automotive solutions,” it said. “We are looking into various internalization options to create synergy and drive future growth.”

LG’s VS division reported operating loss of 2 billion won in the fourth quarter, narrowing from a loss of 63.6 billion won a year ago.

Its sales for the October-December period stood at 1.91 trillion won, up 41.3 percent from a year ago, thanks to the recovery of demand in key automotive markets including North America and Europe.

LG said its VS business aims to make a turnaround this year, expecting the VS division to post sales growth of 15 percent per annum by 2024.

“Especially for electric vehicle (EV) parts, we expect sales growth of at least 30 percent per annum,” it said. “We aim to achieve operating margin of at least 5 percent.”

Last month, LG signed a partnership with Canadian auto parts maker Magna International Inc. to set up a joint venture, tentatively named LG Magna e-Powertrain, to manufacture electric car motors and parts.

LG said the joint venture, which is scheduled to be launched later this year, is expected to create sales on its own from 2023 at the earliest.

“If we only specify sales growth of the integrated power generating module business in the joint venture, we expect sales growth of 50 percent per annum,” it said.

Its business solutions unit logged sales of 1.51 trillion won in the fourth quarter, up 4.8 percent from a year ago, but operating profit declined 11.7 percent on-year to 70.3 billion won due to higher prices for major components and global logistic costs.

LG said its capital expenditure for 2021 is projected to be around mid-2 trillion won.

Shares in LG plunged 6.99 percent to 153,000 won on the Seoul bourse, underperforming the broader KOSPI’s 3.03 percent decline. Its fourth-quarter earnings results were released before the stock market closed.

(Yonhap)