• Tuesday, July 16, 2024
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BusinessDay

LG’s earnings top Samsung’s for first time in 14 years

LG Electronics unveils 2023 TV lineup with striking technological features

LG Electronics reported better-than-expected profit in the first quarter as strength in its automotive business and cost-cutting efforts buffered weakness in its home appliance business.

In its earnings guidance, the South Korean tech company estimated its first-quarter operating profit at $1.1 billion, which is down to 22.9 per cent from a year earlier.

Both revenue and operating profit dropped on a year-on-year basis but its operating profit figure is its third-highest quarterly figure to date.

Sales decreased 2.6 percent to 20.41 trillion won, lower than the market estimate of 20.75 trillion won. Net income was not available.

Stabilizing material costs helped the company achieve relatively solid earnings results.

LG Electronics said the company’s efforts, such as reducing shipping costs and restructuring its business portfolio, to “preemptively” deal with slowing demand amid economic uncertainties helped it navigate various challenges.

The TV business likely achieved a turnaround in the first three months of the year, after a losses in the previous three consecutive quarters, on solid demand in Europe, LG’s biggest organic light-emitting diode(OLED) TV market, decreasing inventory levels and lower marketing costs.

According to Display Supply Chain Consultants (DSCC), premium TV shipments are estimated to have fallen 14 percent from a the year-earlier period in the first quarter, but they are expected to begin rising in the second quarter.

Analyst Kim Dong-won from KB Securities expects the company’s TV business to log 439 billion won in operating profit this year, up 81-fold on year.

Read also: Why Samsung reports lowest profits in 14 years

LG Electronics did not offer a breakdown of division performance, but most of them, including the electric vehicle (EV) parts business, were profitable in the first quarter, according to analysts.

In the fourth quarter of last year, the EV parts business was profitable, 10 years after LG Electronics entered the market.

While demand for consumer gadgets and home appliances is still sluggish, the business solutions division, which covers energy-efficient heat pumps, among other things, is believed to have expanded significantly.

LG credited the performance on its “radical improvement on effectively managing the business structure and operational method.” The company formed what it calls a war room task force to handle the crisis which is now showing results, it said.

LG also said it benefited from a one-time royalty payment this quarter compared to last year — LG licenses its patents related to smartphones and telecommunication to other companies, though it didn’t say which company it was in a business relationship with. The South Korean electronics maker also credited the growth of its automotive parts business.

South Korean analysts had expected an operating profit of 1.24 trillion won for the company during the quarter, and LG exceeded this by 20 percent.

LG also beat rival Samsung in operating profit for the first time in 14 years as the latter suffered major losses in its chip business. LG is expected to announce its full earnings report at the end of the month.