SEOUL, July 29 (Korea Bizwire) — LG Electronics Inc. on Thursday said it expected a solid third-quarter performance with growth in its auto parts business after delivering strong second-quarter results on the back of its home appliance unit amid the pandemic.
The South Korean tech giant said its operating profit spiked 65.5 percent to 1.11 trillion won (US$968 million) in the April-June period, its best second-quarter performance since 2009.
Sales jumped 48.4 percent on-year to 17.1 trillion won over the cited period, its largest ever for any second quarter.
The figures were in line with its earnings guidance announced earlier this month that slightly missed the market consensus.
Compared with the first quarter, when the company posted its best-ever quarterly performance, sales were down 3.9 percent, while operating profit declined 37 percent.
The company posted a net loss of 113.6 billion won in the second quarter as results from its mobile communications (MC) unit were considered discontinued operations. In April, LG announced it will exit from the smartphone business by July after years of losses.
LG said the net loss from discontinued operations of the MC unit was about 1.3 trillion won in the first half of the year, which includes provisions for customer management and service operation costs.
If excluding losses from operating activities in the first half, the net amount reaches 770 billion won. LG, however, declined to reveal the amount of compensation for its suppliers and inventory costs.
LG’s home appliance & air solution (H&A) unit led the second-quarter performance as pent-up demand and robust sales of its premium appliances continued despite rising costs.
It reported 6.81 trillion won in sales, up 32.1 percent from a year ago, and 653.6 billion won in operating profit in the second quarter, up 6.8 percent from a year earlier.
For the third quarter, the company expected its home appliance sales to post year-on-year growth but pointed out that there will be pressure to increase costs as raw material prices and logistics expenses rise.
LG said the unit’s third-quarter operating profit is estimated to be similar to that of last year’s as the company will focus on improving operational efficiencies and product competitiveness in major markets.
LG’s home entertainment unit, which manages the TV business, logged revenue of 4.04 trillion won, up 79.1 percent from a year ago, while its operating profit soared 216.4 percent on-year to 333.5 billion won on the back of growing demand for it premium OLED TV products.
LG said its OLED TVs accounted for more than 30 percent of its TV sales in the second quarter. The company expected demand for its premium TVs to grow steadily in the third quarter.
Looking ahead to the next year, LG estimated its sales growth to be smaller than this year’s as pent-up demand is expected to slow down, along with increased competition in advanced markets.
LG’s vehicle component solutions unit posted second-quarter revenue of 1.88 trillion won, up 106.5 percent from a year ago, thanks to the recovery in the automotive sector and increase demand for electric vehicle parts.
But its operating loss reached 103.2 billion won as a price hike in auto parts over automotive chip supply issues pushed up the costs.
LG said the VS unit will try to make a turnaround in the second half of the year as it expects chip supply in the automobile market to enter the stabilizing phase.
The VS unit will focus on reinforcing its global supply chain management and secure key components to improve its profitability, according to LG.
LG pins high hopes on its auto parts business. Its EV powertrain joint venture with Canada’s Magna International Inc., LG Magna e-Powertrain Co., was officially launched earlier this month.
Its business solutions unit saw its revenue expanding 28.9 percent on-year to 1.69 trillion won due to strong demand for PCs and monitors. But its operating profit declined 15.2 percent on-year to 61.7 billion won due to higher prices of key components.
Shares in LG advanced 1.52 percent to 166,500 won on the Seoul bourse, outperforming the broader KOSPI’s 0.18 percent increase. Its second-quarter earnings results were released before the market closed.