This file photo taken on Jan. 28, 2021, shows citizens with smartphones at Samsung Electronics Co.’s office building in Seoul. (Yonhap)
SEOUL, April 7 (Korea Bizwire) — Samsung Electronics Co. and LG Electronics Inc. have announced their preliminary first-quarter results, and the outcome is a mixed bag.
Samsung Electronics suffered a record earnings shock with its operating profit plummeting to a historic low, not only in comparison to LG Electronics but also to LG Energy Solution Ltd. (LGES)
In contrast, LG reported an earnings surprise with its operating profit doubling compared to Samsung, thanks to the stabilization of raw material prices and the growth in sales of premium home appliances despite the global economic downturn.
Despite having different business portfolios, it’s still challenging to make a straightforward comparison of the two rivals’ performances with figures.
LG attributes its impressive results to efforts to fundamentally improve its business structure by operating a “war room” in advance, which has become visible in business results.
This photo provided by LG Electronics Inc. on Feb. 7, 2021, shows LG workers checking an energy storage system in Anjwa Island, South Jeolla Province, through a smartphone.
According to an LG official, the growth strategy centered on premium sales has also been successful, and efforts to maximize customer value by identifying the market’s demand for high efficiency and eco-friendly products such as heat pumps and energy storage systems (ESS) early has paid off.
In contrast, Samsung has faced a substantial deficit in the semiconductor sector, which typically supports its performance.
The semiconductor industry accounts for about 60-70 percent of its operating profit, and as a result, the company’s quarterly operating profit fell below 1 trillion won (US$759 million) for the first time in 14 years.
The chip business is operated by the DS (Device Solution) division, and stock industry sources estimate the division’s operating loss to be around 4 trillion won in the first quarter.
Samsung had maintained that there would be no artificial semiconductor production cuts, despite the industry’s massive move to cut production, but the company relented and announced cuts for the first time on the same day.
Visitors take a look at a model mobile energy storage system (ESS) on display by LG Energy Solution Ltd. at a battery exhibition in southern Seoul on March 17, 2022. (Yonhap)
LGES, which focuses solely on the battery business, recorded an operating profit that exceeded market forecasts.
The company’s operating profit in the first quarter of this year was tentatively tallied at 633.2 billion won, up 144.6 percent from the same period last year, and far exceeding the recent market forecast of around 500 billion won.
Strong sales of electric vehicle batteries and 130 billion won in tax deductions under the U.S. Inflation Reduction Act (IRA) were reflected in the operating profits.
These quarterly results serve as a performance meter for Samsung and LG, with both companies typically releasing their preliminary performances on the same day with the opening of the earnings season every quarter.
Although Samsung’s first-quarter results were a blow, LG’s success in navigating global economic uncertainty to achieve stellar results is notable.
Samsung is set to relinquish its top spot for quarterly operating profit of listed companies to Hyundai Motor Co. for the first time.
Jerry M. Kim (jerry_kim@koreabizwire.com)
